Comparing wages to the dollar exchange rate would lead to job losses, warns Rewane NLC

Chief Executive Officer of Financial Derivatives Company Limited, Bismarck Rewane

The Managing Director of the Financial Derivatives Company (FDC), Mr. Bismarck Rewane, has advised the Nigerian Labor Congress (NLC) against linking wage demands to the dollar exchange rate.

Rewane stated this during a panel session at the Vanguard Economic Discourse 2024 titled “Reforms in an era of global economic uncertainty: Where to Nigeria?” took place in Lagos.

He noted that this approach is ineffective without taking into account the level of inflation in the United States.

Rewane argued that dollarizing the minimum wage would burden the private sector, a major employer, and could lead to job losses.

“Comparing wage demand to the dollar exchange rate without taking into account inflation in the United States would not work.

Dollarizing the minimum wage would put more pressure on the private sector, which is the main employer of labor, and ultimately lead to job losses.” he said.

Commenting on the reduction in inflationary pressure in 2020 following the increase in the minimum wage to N30,000 from N18,000 in the previous year, Rewane noted that if properly managed, an increase in the minimum wage does not necessarily lead to higher inflation.

Pricing reforms

He assured that the pricing reforms currently being implemented by President Bola Tinubu’s administration will not deliver economic benefits without appropriate institutional reforms.

Commenting on the administration’s efforts to stabilize prices in the foreign exchange (forex) market, Rewane stressed that institutional reforms are necessary to ensure qualified people in leadership positions to implement credible policy and pricing reforms.

He stated: “Institutional reform is key because it prevents corruption and ensures the right people are in the right places. Implementing policy and pricing reforms without institutional reforms risks lobbying and ineffectiveness. Reform of institutions, including the Central Bank, is essential for sustainable economic progress.

Government policies that deepen poverty

NLC President Joe Ajaero, speaking at the event, criticized the federal government’s policies aimed at worsening poverty in Nigeria, arguing that since taking office a year ago, the government has not introduced any reforms that would improve the economy.

Ajaero pointed out that policies such as naira floating, subsidy removal and tax base expansion have not benefited either the economy or the people of Nigeria. Instead, he argued, these policies reduced the economic benefits he had previously enjoyed.

“The purpose of every government is to serve the welfare of the people, including the workers. Prioritizing reserves, savings and economic policies while people suffer and sink into poverty is counterproductive,” Ajaero said.

He emphasized that despite the President’s promise to eliminate poverty, more and more people have fallen into poverty since May 29 last year.

Ajaero questioned the nature of the reforms being implemented, citing increases in electricity rates and currency liquidity as examples that cannot be considered real reforms. He criticized the expansion of the tax net as another burden on workers, who are the main taxpayers with no way to avoid deductions.

The impact of the increase on the spirit of premium motoring

He highlighted the significant impact of the price hike of Premium Motor Spirit (PMS) from N185 to about N700, which has increased the cost of food, education, housing and transportation. Ajaero noted that food inflation is over 40% and overall inflation is over 30%.

When the PMS price hike was announced, Ajaero recalls, the NLC insisted that the government reverse it because of its widespread impact on the cost of living. However, the government refused, instead advising Ajaero to negotiate wages.