SWF Unconstitutional and a Victim of Acute Distrust

SWF Unconstitutional and a Victim of Acute Distrust

What's in a name? That which we call a rose by any other name would smell as sweet.

~~William Shakespeare

Nigeria’s Sovereign Wealth Fund (SWF) is in deep trouble. It is being challenged as unconstitutional, which indeed it is, absent an amendment to the 1999 Nigerian Constitution. The present controversy, once again points to how precept trump principles in policymaking, often creating dissonance and conflict where none should exist. Governance at all levels is not about doing what is convenient or proper, as it is about taking principled positions in the national interest.

Ironically, just like the Minimum Wage Act, which this space addressed recently, the evolution of the SWF and it passage, points to lack of due diligence and due process, political acquiescence, absence of checks and balances, political doublespeak and placing convenience over principles in matters of national interest and in moments of controversy.

On this issue, some may rightly argue that what matters the most, is the good intent, the ultimate objective and what the Fund is and is meant to accomplish, and not what the Fund is called.  As convincing as this argument sounds, it is equally vacuous and self-serving if we are really to be taken seriously as a nation. When the Sovereign Wealth Fund which exists in several countries was conceived, the first act of due diligence in its formulation should have been to ensure that it passed the litmus test of constitutionality and did not infringe of state’s rights. The federal authorities clearly flunked that test.

When the Bill was in draft form, and well before it was eventually passed as the National Sovereign Investment Authority Bill and consequently signed into law by President Goodluck Jonathan on 27 May 2011, the Attorney-General of the Federation and his 36 counterparts in the states could have pointed out the possible unconstitutionality of the Fund, no matter how minor and even if it was just in name alone. These legal luminaries failed in their respective statutory duties.  They thus set the stage for the present confrontation between the President and the State Governors; the sorry junction to which we have arrived.

Let the truth be told. There is nothing inherently wrong in having a national saving scheme for a rainy day and for posterity. Putting such a scheme in place could be at the initiative of the Executive Branch or the Legislative Branch, or a combined effort. It could also be collaboration between the Federal and the State governments.  Whatever medium is selected as the choice, the first rule of the game is to ensure the constitutionality of the act, and second, to ensure broad ownership or consensus. The architects of the SWF failed on both counts.

As it is in life, love, and war, it is a risky fare to make assumptions in law and governance. When the National Sovereign Investment Authority Bill was drafted and passed into law, the assumption was made by many that it would be no problem to merely rename the “Excess Crude Account,” which had been set up by the military through executive fiat and decree, as the “Sovereign Wealth Fund.”  Not so simple; it was a wrong assumption.  True, over the years, indeed since 1988, when President Ibrahim Babangida authorized the dedication of crude oil of 65,000 barrels per day for the finance of special priority projects including Ajaokuta Iron & Steel, Itakpe Iron Mining, and Shiroro Hydro-electric projects and during the first Gulf War in the early 1990s, the federal government had used the Excess Crude Account, (stabilization account) to domicile the windfalls from oil sales and to hold the differential sums earned due to positive disparities in the budgeted benchmark for crude oil sales and the actual market price.  That was all well and good.

What was not well and not good was that all that saving was squandered without proper accounting until this day. And no one has taken responsibility or held accountable. That is a fact! What was not well and not good; was that no one bothered to check what the law and the Constitution would permit. Thus it was not acceptable, and this should have been researched and documented, that whereas the National Sovereign Investment Authority Bill gave effect to the Sovereign Wealth Fund and made it prima facie the successor regime to the Excess Crude Account, the law did not address how to resolve the conflict and its usurpation of the constitutional provisions, which stipulated in Section 162 of the 1999 Constitution, that  “The Federation shall maintain a special account to be called “Federation Account” into which shall be paid all revenues collected by the Government of the Federation....”  Our national track record with dedicated accounts does not represent best practices.  Hence, someone should have questioned the duplication.  Moreover, the constitution spoke of a “special account” not, “accounts”.

Enter conflict, discord, and the present impasse.  Truly, as William Shakespeare proclaimed, “What's in a name? That which we call a rose by any other name would smell as sweet.”  Oh yes, that may be true of flowers, but not so in constitutional and monetary matters and certainly not in handling other peoples’ money.

By the present plan, the SWF is to be funded with an initial seed capital of $1billion and subsequently with unstipulated monthly deductions, from excess oil revenues from the Federation Account.  Anyone, who bothers to recall what happened to the N12 billion naira windfalls from the Gulf War era, that was the subject of the Pius Okigbo Committee report, would have known that the SWF was being built on a shaky foundation. As the Okigbo Panel had surmised, “The problem with these accounts is that even when the revenues were shown globally as in the case of the dedication account, the expenditures were not included in the Federal Budget.”  Who says that the fate of the SWF would be any different?

Where there is immense distrust, lack of transparency, and lack of accountability, where policies are infinitely ad hoc and based on what is convenient, it is always a hard sell to convince stakeholders, in this case state governments and local governments to cede their constitutionally arrogated fiscal rights to the federal government.  This is the crux of the present problem.   Other reasons abound, why the governors might be skeptical about the SWF.  Some elements of the Okigbo Panel report are instructive and therefore worth recalling here:

We believe that a complete autonomy for any central bank is purely fictional, as there is no way it can be totally divorced from government…. In spite of the stipulation in CBN Decree No. 24 that the Bank must not advance more than 12.5% of recurrent budget revenue of the FGN, it has always exceeded 50% during the last seven years. Government should also curtail its excessive expenditures in order to conserve the foreign exchange earnings….the discrepancy between Government fiscal and monetary policies has reached an unacceptable level due mainly to lack of an institutional structure which will allow for effective consultation, cooperation and coordination between the Central Bank and the Federal Ministry of Finance.

The truth be told, the governors cannot whimsically be against national savings. It is therefore wrong as some have suggested that they are being disrespectful or disloyal to the President; after all, the President was until recently one of them.  However, it is within their rights to challenge as they have done, not just the merit of the SWF, but its very essence and constitutionality. That is part of the democratic checks and balances, separation of powers and our three-tiered presidential system of government.  Essentially, under the 1999 Constitution, what is shared is shared, but what is reserved exclusively for the federal and state governments is unfettered and sacrosanct and should be allowed to stand.

Commonsensically, most governors see no reason for the federal government to act as their savings and loans counselor or arbitrage firm, and hold on to funds that they need for the development of infrastructure in their states.  The states are better positioned to determine how much money to spend on critical needs, overhead and how much to save, if any.  As one governor noted, “where the federal government is not providing the much-needed electricity, waters, healthcare, education and infrastructure in the states, it should not hold on to states funds under any pretext.”  I concur!

If indeed, the state governors were consulted and gave their consent before President Jonathan sent the bill to the National Assembly, only to make a volte face now, it must be for good reasons and for the greater good rather than an act of bad fate.  From all indications, their stand on this issue is irrevocable, more so, now that they are faced with demands to fulfill their obligations in paying the new national minimum wage.  They sure do need the funds. Still the governors know that they are not blameless and that the general population is very skeptical about their reservations, because in the final analysis, they too all give the same excuse of lack of money for not executing projects within their remit. So, who says they will use the funds saved from the SWF for any worthy cause?

It is reassuring that the governors and the Finance Minister Ngozi Okonjo-Iweala met recently to brainstorm on the way out of the present deadlock. Minister Okonjo-Iweala is merely engaged in damage control. I suspect that such talks are unlikely to yield any constructive dividend.  As Gov. Peter Obi indicated, the issue is basically one of deep distrust.  The states do not trust the federal government to save and judiciously account for the SWF from here to perpetuity.   Apropos dedicated accounts, of which the SWF is undoubtedly one, the Okigbo Panel recommended, “…that the dedication and special accounts be discontinued and any existing balances be taken into the external reserves of the Central Bank.”  Can someone please point out these lines in the Okigbo Panel’s report to President Goodluck Jonathan?

Incidentally, on this singular issue, the governors have found a common voice that transcends party lines. It proves that money talks. Also, the governors understand, as did the Richard Pryor character, Daddy Rich in the 1976 hit movie, Car Wash, that “The best place for money, is right here in my pocket.”  Moreover, at a time when some within and outside Nigeria are wickedly foretelling the disintegration of Nigeria, why should any well-thinking governor cede away his states’ rightful resources to a dubious future?

The present discord over the SWF is refreshingly good for our democracy, despite being seemingly distractive. For a nation that has scuppered its vast national resources, and given that oil is a non-replenishable able commodity, the desirability or imperative of the SWF is not lost to Nigerians and the governors.  But the federal government can only be judged on its track record. Perhaps, this issue will force a compromise, and better bi-partisan cooperation at all levels. That the governors have been able to rally to a consensus in jointly opposing the federal government on this issue, regardless of their party affiliation, is refreshingly salutary.  For its part, the federal government must not only allay the prevailing fears, but address the SWF’s unconstitutionality question. Absent these measures, off to the Supreme Court goes the case. All said though, for now, the SWF is unconstitutional and a victim of acute distrust. The governors have my vote on this one.

Nigeria: Half a Century of Progress and Challenges

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Nigeria: Half a Century of Progress and Challenges

Edited By Constance Chiogor Ikokwu

(ISBN-978-978-912-901-0): True Expression Press; Nigeria; 2011, 206pp, Price $25.00

 True to its title, Nigeria: Half a Century of Progress and Challenges is an exhilarating excursion into the mixed and paradoxical realm of Nigerian nationhood that many still find very confounding.

In this well-intended and well-edited book, the editor, Constance Chiogor Ikokwu, selects as her medium, the insight, gab, emotions and consternation of fifteen eminent, yet eclectic Nigerians, whose views and criticism of their nation, she melds into a singular volume that offers an all-inclusive insight, deep revelations and justifiable condemnations about the ills that continue to dog the Nigeria nation. The volume does what Nigerians do best; criticism of the self and the leadership; but it also offers insightful solutions to the myriad of problems faced by this once promising country that some now define as a mere “geographical expression” and others, as an experiment that retains great potentialities.

In this thirteen-chapter volume, a vast array of issues is tackled in the context of nation-building, all in a bid to decipher why Nigeria has not self-actualized. Inexorably, the contributors grapple forthrightly and admirably with the successes achieved so far and the seemingly intractable problems and challenges. Frequently debated and topical Nigerian issues, such as Religious Tolerance, Tackling Tribalism /Ethnicity and Stemming Corruption, The Human capital Challenge, the Niger Delta and Development Problems, Rethinking Governance, Dealing with the Missing Link, are considered.

The parameters and tone for the discourse in this volume is ably set by the editor, Ms. Ikokwu, who invites Nigerians to join the fray and “sustain the conversation.” But perhaps one phrase that captures the essence of her motive, medium and the outcome, is that which states that “ideas are powerful.”   In reaching out to a select but diverse group of people who she calls the “Champions of Modern Nigeria” to contribute to this volume, Ikokwu wittingly lured some to render accounts of their stewardship, others to offer unvarnished views of what Nigerians already knew to have gone wrong with their country, and some, to set out visionary and demonstrable parameters for solving existing problems.

In all, the contributors independently provide differing or converging evaluations and analyses that point to national fault lines and pitfalls, which if left uncorrected, would prove most damaging to Nigeria.  The views of the contributors are largely in tandem with those of the editor, who in more ways than one, underlined Nigeria’s penchant for setting incongruous priorities, and embarking on projects that are hardly implemented.  This point is well encapsulated by Emir of Kazaure: “we know our problems and what is required to solve them … for once in a long time Nigerians are, in a highly intellectual rather than rhetorical manner, putting together a treatise on how to forge our country ahead.”

Each of the succeeding chapters in this volume shed some light on the core issues germane to good governance in Nigeria and most, pointed out to prevailing pitfalls and challenges.  Broadly, each author presents some original insight, mostly personal knowledge-based; while drawing on other sources and historical facts to buttress their views. Such an approach, while entirely not in strict compliance to accepted academic analysis format (several chapters are edited recounts of interviews) still succeeded in offering a diametric perspective on diverse and sometimes contentious issues.

The lead chapter by Dr. Chiedu Osakwe dissects Nation Building challenges, dredging up as it were, crucial questions about discontinuities in policymaking and their implementation. The overall picture is not good; “even well-designed policies tend to be ineffective as ‘stand-alone or in isolation’. The mix of companion policies must be right”(p.7). In the same vein, he notes that “reform must become a permanent feature of economic policy making” and “one generation of reforms must be succeeded by another”(p.21). In the end, he does not favour a home-grown model of nation building, as much as he defers to “a pragmatic western model”. He cites several exemplars Nigeria could mimic.

Whereas Rev. Fr. Mathew Hassan Kukah ducked the trap of discussing religious tolerance in Chapter 2 and instead opted to tackle the exploitation of religion for personal or sectional interests, hence his title, “The Janus Face of Religion”, he still provides a counter balance to Dr. Lateef Adegbite’s incisive arguments in Chapter 3 on religious tolerance. Both authors clearly speak to the misapplication of religion and the damage it has wrought on Nigeria. Kukah clarifies a point that is generally mistaken by most; the distinction between a secular and non-secular state and the implication of both for democratic rule. “What we need is the enforcement of the constitutional provisions concerning secularity (not Secularism) of the modern State.…Secularism seeks to defeat religion” (p.35), a point Adegbeti subscribes to, in noting that “secularism offends the belief of Muslims and is completely rejected by them” (p.44). Fathomably, both authors agree that Nigerians have allowed their religion to trump their patriotism and nationality, hence, Kukah’s very loaded question:  “Am I a Nigerian who happens to be a Christian/Muslim or a Christian/Muslim who is accidentally a Nigerian?”(p36). As both a counterpoint and validation, Dr. Adegbite notes that while the 1999 Nigerian constitution prohibits making a particular religion a state religion it does not exclude religion in state affairs. The kernel of their respective treatises is that the current mix of religion and politics in Nigeria remains a tinderbox.

Former EFCC boss, Malam Nuhu Ribadu writes on “Stemming Corruption” in Chapter 4, and while adopting a declaratory approach to attest to what was done during his tenure to stem corruption, never really answers the question as to why under him the EFCC fumbled on most high-profile cases. He bashes those critics, the “not-well-informed” detractors, who espouse the view that successes have not been recorded in the anti-corruption crusade and especially, those who engage in “elite conspiracy” and resort to “that discredited tactics of hacking down the messenger” (p56). He concludes by asserting that Nigeria has suffered a severe reverse in combating all forms of criminality: “sadly, today, evidence suggests a return to the pre-2003 era”(p.58). He is right; as an elite, he understands the how and why.

Whilst it might seem like stating the obvious, perhaps because it has been repeated so often, in Chapter 5, “Securing a Diversified Economic Future for Nigeria”, Nigeria’s former and present Finance Minister,  Dr. Ngozi Okonjo-Iweala asserts that the greatest challenge facing Nigeria is how to diversify its economy through emphasis on other non-oil sectors of the  economy and “solidify the foundation of good management, clean government and rock solid  financial sector and then build on this” (p.77).  The entire chapter, introspective and well-rendered from an insider’s perspective, points to the evident and perennial disconnect between mercurial oil income and desirable planning, as well as the downside to the dependency on oil, which Nigerian policymakers neither control the rise or fall of its prices. She notes that “sizable deficit meant fiscal policy was procyclical, actually amplifying price volatility (p.62).  Without speaking directly to the leadership’s fiscal indiscipline and lack of frugality, she hinted on Nigeria being a “heavily-indebted oil rich country” as indicative of that disposition.  Why not, when the national debt rose both exponentially and geometrically, from “less than a billion dollars in 1970 to $19 billion in 1985” and reached $33 billion by in 2003? As is commonly known, she notes that over $300 billion Nigeria earned between $1970 and 2001, yielded no visible commensurate dividend. Neither did revenue earned between 2001 and 2011.

In the succeeding chapters various contributors grappled with the progress and challenges by Nigeria in various facets: Mr. Ledum Mittee on “The Niger Delta and Development Issues” (Chapter 6); Mr. Jason Ikokwu , on “Tackling, Tribalism/Ethnicity” (Chapter 7); Dr. Martin Uhomoihbi on “Nigerian Foreign Policy: Current Features, Enduring Challenges and  Prospective Solutions”; (Chapter 8); Prof Anya O. Anya, on “Nigeria: The Human Capital Challenge” (Chapter 9); Malam Nasir El-Rufai on “Emerging Leaders in the Society” (Chapter 10); Donald Duke on “The Role of the Youth in Development” (Chapter 11);  Obiageli Ezekwesili,  on “Rethinking Governance in Nigeria” (Chapter 12);  and  Brigadier Buba Marwa, on “How to Achieve Effective Security” (Chapter 13).

One common thread in all the narratives was about lost opportunities and the need to salvage the nation before it is too late.  Another recurring corollary is the call to recognize the Nigerian youth as an asset and the custodians of Nigeria’s legacy, and thus provide them with gainful employment, stem the brain drain, enhance their role national development and stem youth crime by integrating the youth into a new security initiative and infrastructure. Corruption and its malignantly insidious impact were variously dealt with, but as Chief Emeka Anyaoku averred, corruption prevails, “because of the inability of politicians to lead with probity”(p.204). The sum total of the various assessments pointed to leadership shortfall and lack of an enabling environment, a sine qua non for sustainable development.

Of all the contributions, I found Mr. Ledum Mittee piece in Chapter 6, titled “The Niger Delta and Development Issues” and Prof. Anya O. Anya’s piece on “Nigeria: The Human Capital Challenge” the most engrossing and perhaps, the most balanced and the most unsentimental. They both looked at our progress and challenges dispassionately.

From Mittee’s perspective, Niger Delta epitomizes as it were, Nigeria’s multifarious problems and the oil curse, which he goes to prove with facts and cogent arguments.  He presents with clarity how Nigeria’s discovery of oil in the late 50s and its over dependent on that mono-commodity went on to complicate its development agenda, skewering its focus and emphasis on other vital economic sectors.  He touches on the scourge of kidnapping and its linkage to oil wealth and the “settling” of those involved in that enterprise.  Two other points by the author, both related to the problems in the Niger Delta are troubling as they are poignant.  Of kidnapping, he remarked, “Like armed robbery, kidnapping may have come to stay as evidence suggest that it is  gradually  being used as a frightening tool in the resolution of family, business and political disagreements”(p.89).  He also asserts that “whatever hopes we had of aspiring towards being the top 20 economies in the world is but a blurred vision. Perhaps this explains the tragedy of the ignominy which we have continued to treat concerns about the decays in our educational sector”(p.86). The linkages between poor education, kidnapping, unemployment and Nigeria’s laggardly development can be easily deduced.

For his part, Professor Anya notes that “Nigeria properly organized and motivated has all it takes to be one of the leading economies and technological forces of the modern world.” The emphasis here should be on being “properly organized”.  Clearly, the organizing principles that has been applied to Nigeria by the past leadership has not enjoyed consensus. Moreover, as can be gleaned from this volume, Nigeria’s critical sectors, education, health, security, power generation, development and employment and productivity, are still all poorly organized. Accordingly, despite the discernible halting progress, Nigeria is still challenged in all spheres.

Chief Emeka Anyaoku sums up very nicely the basic thrust of Nigeria: Half a Century of Progress and Challenges with his epilogue, “Dealing with the Mixing Link”.  His words in summary: “Nigeria has had its own fair share of mixed blessings… the failure of governance and leadership at home was behind the numerous disruptions that Nigeria’s democracy has experienced since independence… the concluding challenge is how and when what most of the international community regards as Africa’s sleeping giant will wake up.”  That question, one may observe, is well beyond the rhetorical (pp.203-205).

Nigeria: Half a Century of Progress and Challenges is a stimulating read. It adds vim to the on-going leadership debate and looks candidly at past glory and current crisis bedevilling Nigeria. The various articles resonate with nostalgia, melancholy, moods, passion, and yet, with unbridled hope for Nigeria. Those who seek to know Nigeria will gain a glimpse into her troubled soul via this collection. The editor and writers have done their bit to contribute to history and Nigeria’s progress and indeed, they have collectively grappled with a key challenge; how to engage in the dying art of honest dialogue and discourse of national issues without being partisan. Whatever the shortcomings of this volume may be, the editor, Constance Chiogor Ikokwu achieves her mission in a sure-footed way, by providing a fresh book with fresh ideas.

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Deciphering the Minimum Wage Wahala (Rumpus)!

Deciphering the Minimum Wage Wahala (Rumpus)!

State Governors cannot justifiably tell their people that they lack the ability to pay minimum wages. Meanwhile, the federal government cannot employ subterfuge in its dealing with the states; it must enhance their capacity to pay prescribed wages by augmenting their income rather than depleting it through withholdings meant for the Sovereign Wealth Fund… The business of government is neither to self-administer nor to disproportionally devote state’s resources to servicing government bureaucrats.

There seems to be palaver, strikes, wahala and katakata everywhere in Nigeria over the implementation of the minimum wage, but hardly any real debate on the matter.  Most states in the federation and caught in the maelstrom of protests over their refusal to implement the federally sanctioned minimum wage regime of N18,000 per month. Yet, it seems that those involved are once again playing to the gallery on a critical national issue, without publicly acknowledging their role in the political gambit that has fomented the present public policy wahala.  

This much we know. Last February, just two months ahead of a critical general elections in which the ruling PDP was being vigorously challenged, the National Assembly hurriedly passed the National Minimum Wage Act, which raised the minimum wage from N7,500 per month to N18,000 per month as opposed to the N52,250 per month requested by the Nigeria Labor Congress (NLC) and Trade Union Congress (TUC).  Section 2 (1) of the National Minimum Wage Act states, “As from the commencement of this act, it shall be the duty of every employer to pay a wage not less than the national minimum wage of N18,000 per month to every worker under his establishment.” 

On paper, on the campaign trail and for partisan reasons, the minimum wage law looked mighty good.  It was a politically convenient policy and promise for all involved, including those in opposition, both at the federal and state levels.  If the national population were being played for suckers, they hardly knew it.  Outgoing governors cared less, those running for second term were desperate to be reelected and thus acquiesced, and those who were about to be elected for the first time, figured they would cross the bridge of minimum wage once in office.

Some eight months has since elapsed, and as Nigeria celebrates its fifty-first anniversary, there is animus all over. Nigeria’s political landscape is dominated by the din of the grouse over the contentious minimum wage, which most states seem justifiably reluctant to pay. Nearly seventy percent of the thirty-six state governors still oppose the minimum wage; the national population is angry and the labor unions with the support of umbrella bodies like the Nigeria Labor Congress (NLC) and National Union of Local Government Employees (NULGE), are threatening to upend the national work force system. Meanwhile, there is no serious discourse or debate on the issue.  The National Assembly pretends that nothing is wrong, insofar as it has duly enacted a law; even if that law lacks merit and is not implementable. What we have is wahala galore arising from an erroneously thought-out public policy.

There is a paradox here. Pay in any progressive and egalitarian society should be commensurate to productivity and cost of living. This is even more so in a developing nation struggling to put in place certain regimes and improve its human development and living standards. But there is also the critical factor of the ability to pay, which often, is predicated on the judicious allocation of resources as well as the availability of the resources. 

In the present instance, there is an added paradox. In the midst of plenty -- at least perceptible plenty – where the ostentatious lifestyle of the public officers, the rich and famous speaks volumes, and lawmakers and appointed officials cart home millions every month in cash and monetized perks, and where huge emolument the private sector is so configured that overall pay is subsumed in perks-in-kind and cash bonuses, the minimum wage that applies to a majority of the national population, remains starkly paltry.

What exactly are we talking about? The contentious sum N18,000, is less than the equivalent of a one-way economy class air ticket for the junior government or private sector executives from traveling from Lagos, Yola, Enugu, Benin or Calabar to Abuja. For goodness sake, N18,000 per month, which amounts to N216,000 per annum, translates in real terms to $1,440 per annum, $120 per month or $3.90 per day. The latter amount translates to being mired perennially in the poverty peonage, according to the human development index.

The issue here is not really what states pay or are capable or willing to pay. Rather, it is that a one-size-fits-all nature of the policy and pay scale handed down from the top, overlooks that states do not all get the same revenue allocation from the center; therefore, they do not have the same ability to pay and they all have different costs of living in their various territories, no matter how marginal. Also, all states do not generate that same amount of revenue internally. As Nigerians are fond of saying,  “all fingers are not equal”; likewise all states. It is thus a policy fallacy and an egregious one at that to classify all states as financially equal or lump them into the same minimum wage bracket.

It boggles the mind, therefore, that no one is asking the hardheaded question about what exactly went wrong. Was it that a capital intensive national wage policy was passed by the National Assembly without the input of the implementing states and without any adjustment to the revenue allocation, to accommodate the financial overhang. Typical of Nigeria, such policymaking and implementation track is hardly surprising. Indeed, this whole brouhaha would have been averted, if there had been due diligence in ascertaining the financial and program budget implications (PBIs) of implementing the new wage law.

As things stand, attempts to resolve the wage disagreement is not gaining traction, even though the governors have rallied in in hope of finding a commonly acceptable solution.  The National Assembly has been least helpful, since it does not want to recant its position, having passed the wage bill. But that does not change the fact that there is an impasse.  Nonetheless, it does beg the question, as to why the leadership of the Senate would publicly endorse organized Labor’s ongoing confrontation with those states defaulting in the payment of the N18,000 new minimum wage. Such acts are definitely not aimed at collaborative negotiations or finding the proper solution, as much as politicking and upholding the validity of the Assembly’s action.

The fact remains, however, that any project or enacted law that is not fully funded, risks default and not being faithfully implemented. Indeed, when the dispute between the federal and state governments over the constitutionality of Sovereign Wealth Fund is thrown into the mix, the wage issue, which is invariably tied to already controversial revenue and resource sharing, becomes even more emotive.

Despite the good intention, it has become obvious to all that in the end, political expediency and the biting harsh realities of national economics may trump the overall realization of this noble goal. Finding an answer must begin with dissecting the contentious aspects of the wage bill, or at least, factors that militate against its across-the-board implementation.  Failure to do so amicably may result in decisions on the matter residing with the law courts. Interestingly, those on the two sides in this issue -the federal and the state governments – both have valid claims.

While some see the minimum wage bill as a politically expedient act by the federal government, aimed at assuaging deep-seated national discontent, others view it as albatross for the states that must fund and oversee its mandatory implementation. As much as the working force deserves a raise and cost of living adjustment, the governors are confronted with a huge burden, which regardless of the needs of work force,   must be structured to conform to reality and what is fiscally doable.

There is an added dimension. What good is there; and of what value is a national wage bill that seeks to empower the national work force, but cripples their employer states?  Let’s take two cases as examples. The Power Holding Company of Nigeria (PHCN) reportedly generates some N11 billion monthly of which N7 billion is dedicated to servicing salaries and other emoluments. Also, under the new wage regime as Gov. Peter Obi recently disclosed, Anambra State would expend over 75 per cent of the state’s allocated resources to pay the salaries of less than 50,000 workers, despite other demanding challenges facing the state. 

Clearly, it seems that in formulating the new wage policy, there were insufficient comparative analyses done before putting the wage structure in place.  For one, it seemed that the drafters overlooked the fact that a establishing a new national minimum wage would also translate in an upward and progressive adjustment all existing salary structures that would be impacted. Lessons gleaned from the U.S. on this matter would have been most instructive.

In the United States, the minimum wage structure was established in 1938 under the Fair Labor Standards Act.  It created a maximum 40-hour work week and established how much an employer could work and pay an employee for his or her weekly work. More importantly, it guaranteed fixed hourly remuneration for specific work done, and the attending payment for any overtime work. The minimum wage has since risen from the initial $00.25 per hour, to the present $8.67, per hour, introduced in January 1, 2011. In its 73-year history, the minimum wage has been incremental, rising only by $0.70 per hour between 2007 and 2011. It is noteworthy that the U.S. Congress has never raised the minimum wage to keep up with inflation. In the 90s, the Clinton administration gave the rights to each state to implement their own minimum wage law based on the cost of living in their state. This provision is absent in Nigeria’s new Minimum Wage Act.

Policy Dichotomy galore

The present minimum wage crises are emblematic of ongoing policy dichotomies. The primary premise is failure to find common ground. In enacting and implementing such policies, it is known that the devil is always in the details which seem to be the case.  Hence, the present situation raises the question as to whether the state governors and their representatives in the National Assembly ever conferred about their states’ needs and what they could afford to pay.  One would have considered this an imperative in a nation where states rely heavily, if not solely, on revenue for the center instead of the other way round.

Another aspect of these crises which is hardly discussed, relates to true bipartisanship. Central to the problem, may be the fact that a policy such as the wage bill passed by a National Assembly which is dominated by the governing PDP, may play well in PDP-controlled states, but not in those states controlled by opposition parties.  It is hardly any secret, that the federal government steer more funds and projects to states controlled by the ruling PDP. Perhaps, such perks are partly the dividends of democracy!

If the Federal Government meant well, the Minimum Wage Act should have been progressively benchmarked. As such, the minimum wage would have taken effect from the date of its enactment, for those states able to pay, but also include an effective two-year deadline for all states to effectively comply.  This would elicit three consequences. First, states could plan properly. Second, those states that readily pay the wages would enjoy immediate comparatively advantage the attracting the most productive workers. Third,  those states unable to pay would work out a plan to do so in two years, while investors would be inclined to site or move their production industries to those states where labor wages and overhead production costs are cheaper, but not illegal. 

Another policy failure is that the Minimum Wage Act did not tie that prescribed wages to hourly pay, but left it within the executive salary structure. In doing so, the states were handicapped, since they are compelled by law to pay such wages regardless of whether the job is performed or not. In an era of ghost workers, this is a needless risk and huge burden to assume. Moreover, it was hardly factored in that the huge cost of living requirements in Lagos is not the same in Kebbi, Ebonyi, Edo and  Ondo States.

Missed Points and Opportunities

Let’s face it; there has been a gross error of commission on the part of the legislative and executive branches at the federal level and an equally gross error of omission on the part of the state executives, who are protesting , but only after the fact. Undoubtedly, what is at play is the manifestation and culmination of a policy faux pas, bureaucratic missteps and evident lack of clarity, coordination and engagement at all levels on the minimum wage bill its drafting and eventual implementation. 

All told, the present minimum wage fuss has its roots in the absence of clarity in policymaking and the policy itself, as well as the tendency to be reactionary rather than proactive.  If the states foresaw the minimum wage as problematic, they should have nipped it in the bud before it was passed into law, through their respective representatives in the National Assembly.  The Governors could also have opposed it and forced a compromise that would be palatable to them and a policy they could implement across the board, without sacrificing other sectors or unmet needs in their states. 

The root of the present brouhaha lies also in the lack of credible and hardheaded decision-making and strategizing. It seems obvious that there is a shared vision of payment of higher wages as an indicator of higher and improving standard of living. Such disposition should confer comparative advantage to those states willing to pay, while creating an enabling environment for investors. Higher wages in any state means higher spending power and overall wealth generation and economic boom. Incidentally, it is clear that there is no consensus on the strategy of how to collectively attain that goal.

Those governors who willy-nilly refuse to pay the minimum wage are essentially myopic. They lack vision and strategy.  With their backs understandably against the walls, the best strategy would have been to agree to pay, but also at the same time reform their state tax strategy, so that any increment in wages would reflect commensurate increment in income generation for the states via taxes. That would be a win-win situation for all concerned.  Not unlike the Udoji Award, the working population would get a sense of enjoying democratic dividends, but also meet their obligation to the state in terms of the commensurate taxes paid.

Finally, it seem obvious that a national wage policy should be part of an overall national development and economic growth plan, and not an convenient stopgap measure by the ruling elite, meant to convey empathy and buy the momentary silence of the long-suffering and disenfranchised majority. Any policy so motivated or designed, is hardly progressive, transformative, or reform-oriented and therefore, not implementable or sustainable.

As Suzanne Mettler rightly observed by in a recent New York Times op-ed piece, “the threat to democracy today is not the size of government, but rather the hidden form that so much of its growth has taken.”  This is most applicable in Nigeria. State Governors cannot justifiably tell their people that they lack the ability to pay minimum wages, when they hardly provide water, roads, healthcare or sanitation. Meanwhile, the federal government cannot employ subterfuge in its dealing with the states; it must enhance their capacity to pay prescribed wages by augmenting their income rather than depleting it through withholding meant for the Sovereign Wealth Fund.  Apropos, the “hidden form” of government,  tying the minimum wage to hourly rates and work done, would have been an enabler that would not only address the issues of salary bills bloated by ghost workers, but also streamlining payment to be in tandem with productivity and the ability to pay.  The business of government is neither to self-administer nor to disproportionally devote state’s resources to servicing government bureaucrats.

All told, Nigeria’s democracy continues to reflect a paradox and learning curves. There is a semblance of democratic governance but a dearth of commensurate dividends. Nothing reflects this reality as much as the minimum wage issue and so for obvious reasons.  What this whole saga proves is that in Nigeria governance has bumped along the same old rut.  The tax regime at the federal, state, and local levels remain warped as does income generation. For its part, the national population is not blind to the egregiously acquired wealth being thrown around by politicians, neither are they averse to equitable sharing of national resources.  They have expectations that need to be met, not trifled with. One key lesson here for federal and state technocrats and well as the political leadership, is that when policymakers engage in policies that are weak and opaque, they engage in a disservice to the population and the national establishments.  As always, it backfires!

Meanwhile, Happy 51st Anniversary to my fellow Nigerians, assuming there are things in our nation that we are all entirely happy about.