- Increase minimum wage, NLC tells FG
Nigeria, the biggest economy in Africa, is down on its knees following the sharp drop in the prices of crude oil, the country’s major foreign exchange earner.
Since June 2014 when the prices of oil fell from about $110 per barrel to the current average of $50/barrel, the fortunes of the world’s fifth largest exporter of oil has nosedived sharply.
With a major fall in economic growth from a six per cent average to the current negative position, jump in inflation from nine per cent to 17 per cent, and severe weakening of the naira from 150/dollar to 305/dollar on the official market and 380/dollar on the parallel market, the economy is believed to be on a life support.
This, according to experts, is evident in the massive job losses, factory closures, biting inflation, loss of consumer and investor confidence, erosion of disposable income and general lull in economic activities.
To save the import-dependent economy from collapse and huge shock caused by the sudden drop in crude oil prices, the Central Bank of Nigeria has implemented several foreign exchange management policies targeted at the demand and supply of forex.
The CBN’s forex management measures have created multiple exchange rates currently put at five in number.
The multiple exchange rates have led to subsidies and economic distortions with forex round-dripping becoming the order of the day in the nation’s financial system.
While the economy continues to bleed with gruelling hardship for about 170 million Nigerians, economic experts and analysts believe the worst is not yet over, arguing that the country has yet to put in place formidable policies that will take her out of the woods.
Key fiscal and monetary reforms are required but top economists say the journey must begin with the scrapping of the multiple exchange rates to pave way for a single exchange rate regime as well as real and effective exchange rate.
A former Governor of the CBN, Prof. Charles Soludo, believes that to get the country out of the current economic dilemma, policymakers must stop the current multiple exchange rates regime.
According to him, the CBN must achieve a unified market-determined exchange rate by eliminating the current multiple exchange rates as a matter of urgency.
Specifically, Soludo states that policymakers must scrap the current multiple exchange rates regime and reduce the wide spread between the official and parallel market naira exchange rates to a maximum of three to five per cent.
The currency currently has about five exchange rates, according to analysts.
Soludo points out that the CBN’s official exchange rate of N306 to the dollar has become redundant, describing it as an instrument for rent seekers and arbitrary allocation of scarce foreign exchange in the country.
He says, “With regards to exchange rate, I can see quite some changes in the last few weeks. I think some steps are beginning to be taken, but it is still quite a long way to go to get to a stable and predictable level that eliminates the premium among the multiplicity of exchange rates.
“Nigeria must get out of multiple exchange rates and we must eliminate the premium and get back on track at a competitive exchange rate regime. The uncertainty that is created by that is so enormous; and with oil price rising and with the increase in oil earnings, this is the time to take bold steps and do the needful.”
However, economic experts say that whichever way the regulator wants to achieve this convergence (either around the lower band of N305/dollar, mid-point band of N320/dollar or around the upper band of around N360/dollar), the country has a huge price to pay.
According to them, achieving convergence around the official rate of N305/dollar will take a long time as the CBN does not currently possess the stock of forex to push the parallel market rate from the current N380/dollar to the official rate level of N305/dollar.
Conversely, the experts argue that to achieve rate convergence at the upper limit of say N360/dollar, the pump price of Premium Motor Spirit (petrol) may go up significantly from the current N145 per litre.
According to them, oil marketers currently access forex from the CBN at N305/dollar.
Any attempt to achieve rate convergence around the upper limit of around N360/dollar will force oil marketers to increase the pump price of petroleum products.
This, experts say, will have severe inflationary pressure on the economy, causing general increase in the prices of several goods and services.
The central bank must determine what it intends to achieve.
In the meantime, the Nigeria Labour Congress has urged the Federal Government to use the occasion of Democracy Day celebration to announce the composition of a tripartite negotiation committee on the national minimum wage.
The NLC President, Mr Ayuba Wabba, made the call in a statement he issued on Sunday in Abuja, ahead of Democracy Day celebration on Monday.
Wabba, who recalled that the minimum wage was increased to N18,000 six years ago, added that the patience of workers had been stretched due to the current inflation in the country.
“We, therefore, urge the Federal Government to use the occasion of Democracy Day to announce the composition of a tripartite negotiation committee as this is imperative for the government to review the national minimum wage,” he said.
Wabba also condemned the recent coup rumour, saying labour was opposed to any move to truncate the current democratic dispensation.
“The NLC wishes to state in the strongest possible tone that it is categorically opposed to any further military adventurism in the body politics of our nation.
“The damage military rule caused our nation is not only in the realm of our political culture, it deepened and virtually institutionalised corruption in all the segments of our national life,” he said.
The NLC president urged the leadership of the military to identify individuals involved the suspected coup plot and prosecute them.