Labour Force Pay and Productivity: Rethinking Wage Increase in Nigeria

In one of my articles in year 2005 on incessant industrial actions in Nigeria, I argued that
labours resort to industrial action over demand for wage increase is a misplaced priority.
My argument then, was, instead of embarking on strike over wage increase, Labour
should at all times, demand for accountability and transparency from the government on
how and for what purposes public funds are spent. Before I proceed to discuss the subject
of this article, permit me to state that all previous wage increase in Nigeria left the workers
more impoverished.
While it is agreeable that Nigerians are very hardworking people, it is very important to
determine how productive the hard work is. Every effort put into an activity that produces
nothing is futile.It is therefore based on this background that many have questioned the
productivity of the Nigerias labour force. This is evenmore questionable when more than
70% of our annual budget (in form of wages and salaries, overhead and other recurrent
costs) is utilized to service the labour force which is estimated at only about 29% of the
Countrys population. Painfully, more than 60% of the less than 30% budgeted for capital
costs end up wasted as a result of both inefficiencies and corruption by the same 29%
labour force. The implication of this is that more than 88% of Nigerias annual budget is
utilized (wasted) by 29% of the total population (including political appointees).
According to the National Bureau of Statistics short analysis on labour productivity in
Nigeria (2010 -2014), Nigerias Labour productivity figure ranked very low when compared
to other emerging countries. Nigerias labour productivity was US$3.77 in 2014 compared
to an average of USD$20.65 for some selected emerging economies (Turkey- US$28.9,
Russia US$24, Brazil US$10.7 and Mexico US$19.0). Nigeria has over the years
failed to adequately compensate for large numbers engaged in work when viewed from
the lens of labour productivity index and sizes of Nigerian GDP. Nigerias labour
productivity is three times smaller than the average for countries whose economies are of
similar size to Nigeria.
Over the years, Nigerias wage increase has been on the basis of political exigency and
pressures from the labour union and not on the basis of productivity. Worst still, nobody
pays attention to the real implications of such political announcement on the overall
national and sub-national economy, including the ability to pay problem. Promotion in
public/civil service is primarily based on number of years you have spent in an
establishment and your connection to/with the government in power and has no link to
performance. How do you expect a worker to be productive when his wage is not tied to
performance/productivity? No wonder you find mini shops operated by workers of
establishments inside their respective offices.
More worrisome is the trending revelations over unmerited wages heads of government
agencies pay themselves. How can a public servant take home an unearned salary of
N78m/annum? In most cases, in addition to such humongous salary, government still
takes care of their fueling and other personal expenses. The resultant implications are

traceable to the continuing government annual budget deficit, debt accumulation and
lack/inadequate infrastructure.If it were to be in other countries, citizens would have been
on the streets demonstrating over the pillage of the national resources by the selected
few. Ethnicity and religion differences make it easier for rogues to continue in their
looting and sharing of our common resources.
Nigerias quest to becoming the largest economy in 2020 (if we are indeed truly sincere to
ourselves on this vision) is attainable if we optimally utilize our labour force. Our capacity
to improve national growth largely depends on our labour force as it propels productivity
and increases output. Currently, Nigerias working age population is about 53.88% of the
total population and the largest available workforce in Africa. Unfortunately, this workforce
population is underutilized and unutilized with high level of redundancy and dependency
ratio.
With Nigerias market size ranked 25th in world by World Economic Forums
Competitiveness 2015-2016 report, coupled with the huge available workforce, Nigerian
government needs to focus on improving the skills and employability of high dependent
workforce. Almost half of Nigerias output is driven by low skilled employment and
underemployment with more than 84% of Nigerias labour force population suffering
significant skills deficiency. In addition, only about 11% of Nigerias workforce population
has post-secondary education. Unfortunately, governments investment in social sector is
constantly declining. No real action based attention has been given to the education
sector in terms of quality and availability by the government. Claimed investments in
power and infrastructure yield no benefits with allegations of monies appropriated for
these sectors ending up in bank accounts of either government officials or their cronies.
Following the gaps identifies above, we have continued to grapple with an increasing
mismatch in labour skills and labour market requirements, leading to excess supply of
labour with its attendant effects as low wage and low skilled subsistence jobs.
Nigeria has the potential of becoming the next worlds production hub after China given
our huge cheap work force population and big market size.Nigeria must therefore invest
heavily on human capital and infrastructure development in order to create the right and
conducive business environment. Nigeria labour unions priority should therefore be to
make the government put the necessary infrastructure (physical, human, financial and IT)
in place to attract real investors either through dialogue or industrial actions.
Making Nigeria an investment destination would ultimately lead to higher demand for
labour force which would in turn lead to higher wage. This assumption holds when the
demand for labour becomes higher than the supply of labour. On the other hand,
government should as a policy, determine wage increase on the basis of productivity and
performance and not as a political tool.

About the writer

Chiwuike Ubais currently working with African Heritage Institution (AfriHeritage), an
international think tank established to provide intellectual leadership through evidence based
research, to inspire, inform and influence public policies.