We do not object to the proposals by the Minister of Labour for the raising of the pay of public servants in the face of mounting inflation. But, if it is a strategy or ploy to win votes, as was suspected to be the case in the similar exercise in 2019, it is even doubly tragic, because the last exercise has proved to be unwise economically.
However, we vehemently object to the upward review of the remuneration of political office holders being promoted by Mohammed Shehu, Chairman of the Revenue Mobilization, Allocation and Fiscal Commission. Nigerian political office holders are already over-paid, relative to their peers around the world, including those of the richest and most advanced countries.
The move is another evidence that the APC-led Federal Government is an obdurate cult group for dividing up the wealth of our traumatized country among the few in power, who are living in a world of their own, despising the people.
Moreover, it should be noted that, in our circumstances, wage increase is mere treatment of the symptom instead of the disease. Where production is highly constrained and can hardly respond to increased demand, wage increase is like pouring fuel on fire.
There is not a chance that pay can ever catch up with inflation in Nigeria until the malaise is addressed from the root. The better approach is to curb leakages in the flow of public funds and to work assiduously towards the generous availability of those basic needs for which pay adjustment is often sought, such as food, shelter, education, healthcare, transportation and electric power, reform the public service.
Money is a measure of value. Inflation arises when the same amount of money could only buy less of the same item (or a bouquet of items) relative to what it could buy in the preceding period. In simple terms, inflation is a measure of the fall in the purchasing power of the currency over time, which is related to the output of goods and services: the more the supply of goods and services, the more the same amount of money can purchase, vice versa – baring an escalation of money supply.
Based on the Consumer Price Index as measured by the National Bureau of Statistics, our inflation rate stood at 21.09 per cent by October, 2022, which was among the highest in the world. It means that if N1000 could buy five loaves of bread a year ago, it could buy only four loaves today.
It might mean that the cost of bread production has gone up and fewer units are being produced with the same capital or that there is now more money with buyers demanding bread more than producers can supply. It could also be both reasons. The bread analogy would apply to other items.
Nigeria’s inflation is mainly attributable to rising cost of production – due, among others, to scarcity of foreign exchange and consequent adverse exchange rate for both raw materials and finished goods (being import-dependent), adverse interest rate for credit facilities, declining access to electric power, and high price of diesel, poor transportation facilities and disruptive effects of pervasive insecurity.
The principal source of foreign exchange is crude oil sales, which has been highly diminished by organized crude oil theft, incomplete remittance of official sales proceeds, concessionary foreign exchange allocation to cronies of the government and all sorts of financial crime.
Due to these worsening, but controllable leakages and wastages, Nigeria’s cashflow has perennially been negative. Public debt now exceeds N50 trillion. With debt-service obligations exceeding total revenue, we are at the threshold of a debt trap.
Federal government’s resort to Ways and Means financing (printing of unearned money by the Central Bank) to meet domestic obligations, is pouring more fuel on the inflationary fire. To all this rascality must be added the pervasive insecurity in the land, the Russia-Ukraine war, as well as climate change, flooding and other natural disasters disrupting supply chains around the world.
For example, in October, 2022, for the umpteenth time, floods overran many communities in 33 out of the 36 states of the federation, claiming more than 600 lives, with millions displaced and more than 200,000 houses and hundreds of thousands of hectares of farms destroyed. Together with the dislodgement of farmers by marauding Fulani herdsmen and bandits, food inflation (which is a major component of composite inflation) is sure to worsen.
Everything considered, it is our view that the Nigerian inflationary situation is largely self-inflicted. To rein it in, focus must shift from pay rise to dealing decisively with insecurity; promotion of the enabling environment for production; sectoral diversification of the economy; proactive containment of natural disasters; curbing the pervasive profligacy, high cost of government, theft of crude oil and other public resources along with taming the multifarious leakages in the flow of public revenues.
These measures will accelerate self-sufficiency in the basic needs of the people (starting with food, which is the greatest need of man); improve the supply of foreign exchange, regenerate the Naira, minimize inflation and generate macro-economic stability and comfortable wages.