Minimum wage review: Analyst demands evidence to show potential inflation

A professor of Capital Market and the Chair of Banking and Finance Department at the Nasarawa State University Keffi, Uche Uwaleke, has debunked the insinuation that an increase in minimum wage will cause inflation and affect the monetary policy in Nigeria’s economy. The professor, who believes that the trend in 2011 is somewhat similar to what is happening now, reiterated the position of the National Bureau of Statistics, stating that the inflationary trend, rose from 10.8 per cent in 2011 to 16.5 per cent in 2017, without failing to identify the increase in exchange rate, which rose from about N162 to N360 within the same period, had an adverse effect on the purchasing power on low-earned workers. Uwaleke stated further that: “One major criticism of a minimum wage hike is that it would result in demand-pull inflation and complicate monetary policy. On this score, the evidence is scanty”. “When the National Assembly amended the National Minimum Wage Act in February 2011, increasing the minimum wage from N7,500 to N18,000, average inflation rate actually dropped from 13.7 per cent in 2010 to 10.8 per cent in 2011 and further down to 9 per cent in 2016.” “It was not until 2016 that inflation spiked to 15.7 per cent on the back of an increase in both the pump price of fuel and electricity tariff. What is clear from quarterly reports of the National Bureau of Statistics is that inflation in Nigeria is more from cost-push than demand-pull factors”. He further highlighted the impact high costs of energy and transportation has led to rapid increase in inflation, stressing that the result on food commodities has left the low income earners with little purchasing power in a power-pushing economy. Joy Obakeye