Bismarck Rewane, Managing Director of Financial Derivatives Company (FDC), has urged the Nigerian Labour Congress (NLC) to reconsider its stance on linking the minimum wage demand to the dollar exchange rate. He warned that such a move could lead to significant job losses, particularly in the private sector, which is the major employer of labour.
Speaking at the 2024 Annual Vanguard Economic Discourse in Lagos, themed “Reform in an Era of Global Economic Uncertainty: Whither Nigeria,” Rewane highlighted the challenges private sector operators face, including various macroeconomic pressures that erode their revenues. He stressed that these businesses can only pay wages from their generated revenue.
Rewane emphasized that for effective price reforms, institutional reforms must precede them to ensure that competent individuals hold positions of authority. He also noted that the naira would continue to depreciate if Nigeria fails to earn dollars through exports.
Reflecting on past minimum wage adjustments, Rewane recounted, “In 2019, the initial proposal was ₦18,000, and after negotiations, it was raised to ₦30,000. Despite the wage increase, inflation declined from 11.4% in 2019 to 6% in 2020, showing that the adjustment was well-managed.”
He cautioned against dollarizing the minimum wage, explaining, “If you peg the minimum wage to the dollar, you must also factor in U.S. inflation rates. The private sector, which contributes significantly to the GDP, would struggle to pay these wages without leading to job cuts and economic strain.”
Rewane argued that without institutional reforms, price reforms would be ineffective. “Institutional reforms prevent corruption and ensure the right people are in key positions. For policy and price reforms to succeed, institutions like the Central Bank must be reformed.”
Discussing currency stabilization, Rewane stated, “Nigeria’s currency stability depends on its ability to earn dollars through exports. The Central Bank of Nigeria must address market structure issues and ensure efficient and transparent operations. The more players in the market, the more efficient it becomes.”
Rewane noted that currency volatility is a natural market phenomenon. “Look at the fluctuations in other currencies like the Ghanaian cedi or the South African rand. The Central Bank cannot print dollars; it can only manage the market efficiently to stabilize the currency. Consistent export earnings and market transparency are crucial for the naira’s stability.”
He concluded by emphasizing the need for communication between operators, policymakers, and regulators to create a stable and efficient market. “The fundamentals, such as trade balance and export earnings, must be strong for the currency to maintain its value.”
