Recently, President Buhari assented the new N30,000 minimum wage bill into law with an immediate effect. The only exceptions to the Act are employers with less than 25 workers, a ship which sails out of the country and other persons who are in other kinds of regulated employment accepted by the Act.
Now, the next hurdle for the President and other employers of labour is about how the new national minimum wage will be funded. It is noteworthy that at the former N18,000 minimum wage, several states within the country were struggling to pay their employees amid stifling income growth. Thus, various recommendations, ranging from the more obvious expansion of tax-net, increased borrowing, to the removal of subsidy on petrol prices as well as Naira devaluation, have been touted as a solution to the overall financing quandary.
In the near term, we believe the option for the government is down to growing revenue-especially through a more aggressive tax mobilization and borrowing (internally and externally). While the latter recommendations (Subsidy removal & devaluation) may benefit the overall economy, implementation in the
immediate term may be followed by a strong public backlash, owing to their combined negative impact on real income. Sooner or later, we suspect the authorities would have to ‘bite the bullet’.
UNITED CAPITAL RESEARCH