By Bajowa Oni

It is hard to argue that, considering current economic realities, an update of the minimum wage is not necessary.When the current administration came into office a year ago, inflation was at 22 percent. It now stands at 33 percent, with food inflation higher than 40 percent. Nigerians bear the brunt of these increases daily at markets across the country, and many families have had to cut their expenditure to fit the times.

The need to reflect the cost of living in the new minimum wage is at the heart of the tussle between organised labour, led by the NLC and TUC on one hand, and the government and private sector on the other hand.

Labour’s starting position was N615,000 per month, but has now moderated to around N200,000 per month after several rounds of negotiations. The federal government, for its part, has proposed N60,000, a position which the NLC has rejected as a starvation wage, leaving both parties wide apart.

The government also insisted on its position because it was offering a series of non-monetary incentives, including:

1) N35,000 wage award for all treasury-paid Federal workers.

2) N100 billion naira for the procurement of CNG-fuelled buses and CNG conversion kits.

3) N125 billion naira conditional grant and financial inclusion to MSMEs.

4) N25,000 each to be shared to 15 million households for 3 months.

5) N185 billion palliatives (loans to States) to cushion the effects of fuel subsidy removal.

6) N200 billion naira to support the cultivation of hectares of land to boost food production.

7) N75 billion naira to strengthen the manufacturing sector.

8) N1 trillion naira for student loans for higher education.

9) Release of 42,000 metric tons of grains from strategic reserves.

10) Purchase and onward distribution of 60,000 metric tons of Rice from the rice millers association.

11) Recent salary increase of 25-35 percent on all consolidated Salary structures for federal workers.

However, apart from the reality of Nigeria’s inflation, there is also the issue of the ability of states to pay the minimum wage. Nigeria’s states are in a slightly different position from the federal government and the private sector. The Federal Government can print more money to do what labour wants, with all the damage that will do to the economy. The private sector companies who will be affected by the minimum wage increase can do a range of things as well: they can raise prices, sachetise their offerings, layoff staff, or failing all else, simply close shop as many firms have already done. For states, it is different.

They cannot print money and there are limits to the debt they can take on. As a result, they will have to rely on a loan of some sort from the government to meet their wage obligations. There is already precedent for this.

Not all fingers are equal.

The last time the minimum wage was increased was in 2019, when it was raised to N30,000. It is worth noting that as recently as May 2022, three years after adoption, seven states were yet to implement the minimum wage. Part of this is because states do not generate enough revenue internally to be able to implement the minimum wage, as well as the adjustments across all cadres that often results. Most states still depend on the monthly federal allocations to function.

In fact, only three states — Lagos, Ogun and Akwa Ibom — generate more in internal revenue than they receive in federal allocations, according to BudgIT, a fiscal transparency organisation.

The case has been made previously that states should be able to determine their own minimum wage based on their respective financial positions, which vary significantly.

According to BudgIT’s 2023 State of States report, Lagos generates N43,386 in IGR per capita, more than double the figure of Rivers State in second place with N21,422. As far as that measure is concerned, Rivers is closer to Zamfara (N1,191) in last place than it is to Lagos.

These wide disparities mean that any minimum wage discussion that does not consider the ability of all the 36 states to pay, will only result in a pyrrhic victory that benefits far fewer workers than first thought.

Earlier this June, a source who was privy to the discussions of the Nigerian Governors Forum about the minimum wage revealed that only ten states can afford the proposed minimum wage of N62,000.

The states are: Lagos, Edo, Delta, Akwa Ibom, Bayelsa, Cross River, Rivers, Ogun, Kano, and Kaduna. The source also added that compelling the states to pay such a wage could lead to layoffs across the affected states. It will be no surprise to realise that the states who can afford the proposed minimum wage are the ones with the most revenues overall. It will be recalled that Edo State is already paying N70,000 minimum wage to workers in the state, which commenced in April. This is an example of a state government looking at its finances and arriving at a proactive solution to address the cost-of-living crisis. However, the new minimum wage is not for only one state or ten states. It is for the whole country.

The focus therefore, should be a sustainable minimum wage that all states can pay. Failure to do this will lead to the FG giving budget support to states who cannot afford the new wage.

When that budget support runs out, default will become the norm and workers in many states will go back to square one.

So much for so few

Another reason why the minimum wage adjustment is so contentious is not just because of the wage itself, but because of the consequential adjustment that results. The new wage applies to civil servants on Grade levels 1 to 6, but Grades 7 to 17 also get an adjustment as well, leading to a significant effect on the personnel costs of the states. At the last increment, civil servants from Grades 7-17 got increases ranging from 10-23 percent.

Under a scenario of a N70,000 minimum wage, the wage bill of states is expected to increase by 70 percent on average, a huge jump. In a N150,000 scenario which will be more appealing to Labour, that wage bill will go up three and a half times or 250 percent. On top of this, remittances from the NNPC have dried up because petrol subsidy is back. This means that the states have less funds to satisfy the minimum wage demands. The current petrol subsidy is around N500 per litre ex-depot, one of the biggest differentials in the subsidy scheme’s history. Sustaining it comes with costs at every level.

Already, a relatively small percentage of people get a significant portion of the state’s revenues as salaries and pensions, leaving little for things like infrastructure, education and healthcare. An increase in the minimum wage will ensure that a fraction of the population gets an even larger chunk of revenues at state and federal levels.

Recurrent expenditure – of which wages are a central component – is already sky-high. As of 2022, recurrent expenditure as a percentage of total revenue averages 89 percent for the 36 states, leaving little for important capital expenditure that is necessary to drive governance outcomes. A new minimum wage with the current fiscal reality will only worsen this picture. It will mean that states exist to pay salaries and pensions, with little fiscal space for anything else.

While it is certainly true that organised labour has the responsibility to cater to their members, which total only about two million people, their push for higher wages can easily see them become part of the problem rather than the solution, if those wages are unaffordable and also take resources away from other areas that need urgent attention.

In trying to fix one problem, it is important not to do things that will make other problems worse.

FirstBank’s 130 years of gripping history is a corporate handbook in many ways. Its fortunes are as great a lesson as its challenges. Its leadership and choice of leaders are fascinating chapters of the book it has become, validating the notion that each era in human history is shaped by the king of the moment. This is true across the corporate environment but uniquely applicable to Nigeria’s premier bank.

For its diffused ownership structure, its leadership is particularly dynamic, adding a great deal of variety to the journey. The confirmation of Olusegun Alebiosu as the new Chief Executive officer of the bank is seen as a consolidation of the rich culture of the bank. At a peculiar juncture in its 130 years of incorporation, the market has seen a new FirstBank that is ready to compete with the new entrants to recover the market it was holding in its grip as a monopolist.

The bank is consolidating on its adoption of the new ‘click’ banking through which it has invested heavily in digital infrastructure. The success Alebiosu helped to create at the corporate performance of Q1, the quarter heralding Alebiosu was particularly fascinating across top and bottom-line indicators. First, the bank’s total assets leaped by 28 per cent year-on-year to N20.7 trillion, while gross earnings rose by 178 per cent to N682.5 billion on the back of strong growth in the credit portfolio (which was 33 per cent up from December 2023). Non-interest income, which reflected the robust transactional platforms, doubled year-on-year to N224.6 billion compared with N110 billion it earned in Q1 of 2023.

The Chief Executive Officer also rode on powerful bottom-line indicators with profit before tax seeing exponential growth of almost 300 per cent to N209.8 billion and profit after tax growing in the same margin to N188.5 billion. These are not isolated figures but a reflection of a decade of robust performance of the banking group that feeds into the holding company that has become the toast of the investing public in recent years.

For one, FirstMobile, its digital banking application emerged as a household name in the financial technology ecosystem. In 2015, when the platform was still in its infancy stage, its user base was about 60,000, a figure that has soared to over six million as of last year. That has contributed immensely to changing the market’s perception of the institution as a traditional bank to an innovative digital bank.

Today, over 85 per cent of its transactions are initiated via digital platforms, according to insights provided by the bank. That suggests that while it consolidates on its hedge as a saver’s bank, it has also emerged as a transaction-driven bank. FirstMobile appears to have hit the bull’s eye in the bank’s reinvention drive and efforts to appeal to younger demographics. However, the platform is only one of the many telecommunications-driven initiatives the bank has innovated to get young depositors on board. FirstOnline has also grown in leaps in terms of users – from about 90,000 to over one million in less than a decade.

USSD banking, under the watch of the immediate past handler, is even more successful with users increasing by close to 3,000 per cent in the last eight years, to about 15 million. What USSD banking, which targets feature phone users and rural communities where internet penetration is still very low, has done for the bank is giving a slice of it to the original owners – rural dwellers and non-Internet natives who had never known any other bank than FirstBank.

The success of Firstmonie Agent Banking also validates its agelong popularity in rural areas. Last year alone, its Firstmonie Agent Banking services processed over ₦1.1 trillion in transactions, more than double the amount handled by seven other big banks. Its strategic investments in technology include the development of its interactive transaction banking platform known as FirstDirect2.0 and the introduction of the humanoid robot to the banking ecosystem in the country.

The smart banking initiatives have been complemented by its Digital Xperience Centres (DXC), which are currently located in Lagos, Ibadan, and Abuja with plans to open more across the country. Overall, its digital banking has evolved in both volume and public perception even with artificial intelligence-driven commercials complementing its digital imprints. Ease, convenience and reliability created in recent years have moved the customer base from 0.6 million in 2015 to well over 42 million customer accounts as of 2023. This number, according to the immediate past Chief Executive Officer, Adesola Adeduntan, would double in no distant future as the organisation migrates more aggressively to transaction-led banking.

Last year, its holding company earned N171.8 billion in income from fees and commissions, a 46 per cent year-on-year growth, demonstrating its success as a transaction-led bank. Its fee and commission income growth were not an exception but drew from impressive performances across the board. Its operating profit also jumped by 129 per cent, much higher than the industry average, to N361.8 per cent, leading to an earnings per share of N8.56k.

The total assets also saw a 60 per cent growth to N16.3 trillion. The total assets, like other metrics, had seen over 300 per cent expansion from 2015 when it was N4.2 trillion. FirstBank also experienced aggressive growth in its customer base in the past nine years. The figure has grown from 10.9 million to over 42 million customers, leading to the aggressive growth of fee and commission income of the bank.

Culled from Guardian

By Ola’ Ajao-Akala

In the wake of recent unrest in Kenya, triggered by the controversial finance bill, there lies a poignant lesson for Nigeria—a warning about the potential consequences of perceived governmental insensitivity during times of economic hardship. As the Nigerian government contemplates the purchase of a new presidential jet for President Bola Tinubu, the tumult in Kenya serves as a stark reminder of the dangers of tone-deaf fiscal decisions.

Kenya’s current crisis began with the introduction of a finance bill that imposed new taxes and exacerbated the economic burdens on its citizens. The resultant backlash was swift and severe, with widespread protests and civil unrest. The Kenyan populace, already strained by economic challenges, viewed the bill as a blatant disregard for their struggles. This perception of insensitivity fueled public anger, leading to violent demonstrations and clashes with security forces.

Nigeria, with its own set of economic challenges, stands at a critical juncture. The country grapples with high inflation, unemployment, and a weakened naira, all of which have strained the average Nigerian’s ability to make ends meet. In such a context, the news of a potential purchase of a new presidential jet for President Tinubu could be perceived as an egregious display of government insensitivity.

The decision to acquire a new jet, a luxurious jet previously owned by a Sheikh and currently repossessed by a German bank because of the Sheikh’s inability to pay and which was estimated to cost 100 millions of dollars, is likely to be seen by many Nigerians as an extravagant expenditure that prioritises the comfort of the political elite over the pressing needs of the populace. This perception could ignite a wave of public discontent, similar to what has been witnessed in Kenya.

The optics of such a purchase are especially damaging when juxtaposed with the daily realities faced by ordinary Nigerians. Many struggle with inadequate public services, including healthcare, education, and infrastructure. The sense of inequality and injustice could be further exacerbated if the government proceeds with this high-profile expenditure.

Moreover, the timing of this decision is crucial. With the recent 2023 general elections, the Nigerian government must be acutely aware of the electorate’s sentiments. Public perception of governmental priorities plays a significant role in shaping political fortunes. A decision perceived as insensitive could erode public trust and support, with far-reaching implications for the political landscape, and with an already unpopular APC, such a decision would be more catastrophic for the political party.

The Kenyan experience underscores the importance of empathy and responsiveness in governance. When governments are seen as disconnected from the realities of their citizens, the resultant discontent can manifest in ways that destabilise societies. Nigeria, therefore, must heed this lesson.

Rather than proceeding with the purchase of a new presidential jet, the Nigerian government could explore alternative ways to demonstrate fiscal prudence and solidarity with its citizens. Investments in critical sectors such as healthcare, education, and infrastructure would not only address pressing needs but also signal a commitment to improving the lives of ordinary Nigerians. The government can also cut down on international travels, if they must, they should fly commercial airlines like Air Peace. They should also travel by roads while travelling locally, this will allow the president to experience what its citizens are enduring on a daily basis using our bad roads.

In conclusion, the unrest in Kenya serves as a cautionary tale for Nigeria. The potential purchase of a new presidential jet, if perceived as an insensitive and extravagant decision, could provoke public outrage and erode trust in the government. At this critical juncture, the Nigerian government must prioritise empathy and responsiveness, demonstrating a genuine commitment to addressing the challenges faced by its citizens. By doing so, it can foster a sense of unity and shared purpose, steering the nation towards a more stable and prosperous future.

Ola’ Ajao-Akala wrote from Osogbo, Osun State