NEW MINIMUM WAGE, NEW VAT OF 7.5% AND INFLATION

NEW MINIMUM WAGE, NEW VAT OF 7.5% AND INFLATION
                           By:
              Nurudeen Dauda
              September 15, 2019
nurudeendauda24@gmail.com
nurudeendauda24@yahoo.com
nurudeendauda.blogspot.com

To begin with, the bitter truth is that we have been operating a "Feeding bottle economy" which is at the same time a mono-culrural. Still worst, it is largely a Petro-dallar earning based which is at the same time a very volatile source. Our state governments often go "cap- in-hand" on monthly basis for "hand-out" from the Federation Allocation Account. This in my thought, will hardly get us out of the woods .

In my observation, the labour unions will in the coming months have to "choose" between the proposed Increament of Value Added Tax,(VAT) from 5% to 7.5% come 2020 or its rejection which may lead to a show down with the government . The government argues that VAT increment will shore up more revenues for the implementation of the new minimum wage of N30,000 and other capital projects. 

However, If the labour unions at the end of the day accept VAT increment for new minimum wage the results will ultimately be inflation. If that happens it will therefore "mean" giving workers with the right hand, only to collect it with the left hand . 

On the other hand, if labour rejects its and continue to demand for the implementation of the new minimum wage in the midst of financial "crunch" it will be a nightmare for , especially , states and local governments who have been defaulting in salaries, pensions and gratuity even at N18,000 minimum wage .

It appears that the "idea" of National minimum wage or wage centralization where every state irrespective of their "capacity" must pay same "amount" as minimum wage is becoming a national problem. I am not unaware of the fact that minimum wage means the "least amount" you could pay. I have always advocated for minimum wage decentralisation. 

I have always held the view that , the best thing to do by both the labour unions and all well meaning Nigerians is to push for the provisions of affordable social services which will ultimately benefit all and sundry without causing unnecessary inflation in the economy. 

In my thought, the "best thing" the Labour unions should always do in order to improve the welfare of "workers" is to pursue for the provisions of Social Services; such as: (1) Affordable Housing, (2) Public transportation, (3) functional public schools, and (4) functional public hospitals and effective Health Insurance policy. 

If labour unions pursue the said social services it wil impact greatly on the "welfare" of both "workers" and the general public without causing unnecessary inflation.

From July, 2014 when the price of crude oil which happens to be the mainstay of our economy and at the same time contributes more than 70% of both our national and states annual budgets began to fall from as high as $115 to as low as $27 a barrel in January, 2016 about 27 states defaulted on either "salary"or "pension" or "gratuity" and or all.

The proposed increment of VAT is a consequent of the new minimum wage .The issues of defaults is more pronounced at both states and local governments levels . 

No doubt, VAT increment will bring more resources to states and local governments who have been grappling with the challenges of revenue shortages .The VAT sharing formula is 50% for states, 35% local governments (which is 85%) and the Federal government gets 15%. However , one must admit that it will certainly lead to an unnecessary inflation.

In my view, it is high time we decentralize our minimum wage. It is more attuned with the reality of life and the federal system of government which we operate .The federal government going by it huge resources it has the capacity to pay the new minimum wage, but our practicing of unitary system in federal system is unnecessary dragging us to a standstill.

Minimum wage decentralization is the best way to go. It will enable every"state"or "employer" to determine"what to pay their workers as minimum wage based on their capacity which is more realistic . The "earnings" or "Income" of state governments by both Federal allocations and Internally Generated Revenue ,IGR, differs considerably.

May God bless Nigeria!

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