President Bola Tinubu’s proposal for salary increases of ₦25,000 (US$32) a month for the next six months defused a planned nationwide strike that was due to begin on 3 October but was called off. It is intended to mitigate the impact of price increases which followed his decision to eliminate fuel subsidies. All Federal Government workers will receive the pay rise and the 36 state governments are expected to follow suit with similar increases. 

Tinubu made the announcement in his first Independence Day broadcast on 1 October but there had been concern that he would not be in the country. On 22 September he had left New York after attending the UN General Assembly but for the next week his whereabouts were officially unknown. Credible sources and his flight plan indicated that he had travelled to France which was probably to meet his doctors regarding the unidentified illness for which he has been treated for a number of years. His media assistants and non-essential employees did not accompany him to Paris which implies that the trip was deemed very personal.

On 30 September, he returned to Nigeria just in time to pre-record his Independence Day broadcast. Like former President Muhammadu Buhari — who made frequent and sometimes unannounced medical trips to London — Tinubu is likely to follow a similar pattern with frequent medical trips to France but this may not be an issue if they are short. 

Major pay rise to deter national strike…

While he was abroad the country’s two largest unions — the Nigerian Labour Congress (NLC) and the Trade Union Congress (TUC) — announced their intention to begin an indefinite strike on 3 October because Abuja had refused to agree to a wage increase and other demands. 

This was a final attempt to compel the government to respond to their 300% wage increase demand. Union representatives met Tinubu on the evening of 1 October and pledged to consider his promise to give ₦25,000 (US$32) a month to 15 million households. It is unclear what will happen after six months A return to the previous pay scale would spark a major clash with the unions. Also the award will immediately increase prices on the open market which will not be fall again in six months’ time. 

Therefore Abuja cannot reverse the decision but it may be in anticipation of successful negotiations for a new minimum wage law. The temporary salary increase will continue until the new minimum wage is approved in hopefully less than six months. 

The award is expected to be clarified in the coming days just as the trade unions determine whether to proceed with the 3 October strike but it is hoped that enthusiasm for it will now be somewhat dented.

…which states will have difficulty in paying 

Tinubu will face a greater challenge convincing the state governments — which were already struggling with a minimum wage of ₦30,000 (US$38.50) per month — to pay the increase. This is despite the more than 50% increase in their monthly allocations from the Federation Account since the fuel subsidy was removed and the Naira devalued. Abuja and the states shared revenues totalling ₦1,100 billion (US$1.4 billion) in August which was ₦192 billion (US$246 million) more than in July.

Since June they have shared an average of ₦1,000 billion (US$1.29 billion) in monthly revenues, compared to ₦600 billion (US$769 million) before June. It is unclear whether this will be sufficient to finance the wage award because many states have bloated workforces and already struggled to pay salaries and to service their debts before the increase in income.

The revenue increase providing them with the headroom to undertake some infrastructure projects but increasing salaries could derail that aspiration. Tinubu’s announcement will probably lead to a labour crisis in many state governments and particularly because it is unclear whether he informed the governors or not before announcing the rise. In his Independence Day address he also announced the creation of an infrastructure support fund for the states which was perhaps in recognition of the challenges that they are likely to confront.

It is unclear how this fund will operate, but it will likely to result in states getting some sort of matching grants and loans from the federal funds on infrastructure. This could assist them in increasing expenditure and particularly on roads.