For the average Nigerian worker (lower-cadre staff to middle-level managers in medium-to-large sized corporate businesses), the past fifteen years has been a period of mixed fortunes in economic terms.
Driven by three main developments, the 21st century was ushered in with social enthusiasm and high economic expectations. First was the successful transition to civil rule in May, 1999 and the major policy and institutional reforms that followed. The second was the magnanimous increase in workers’ compensation from year 2000. The third factor was the glaring improvement in Nigeria’s risk perception within the global economic community and positive effects on investments, debt write-offs and new partnerships.
In line with the biblical submissions that “the husbandman that labours must be first partaker of the fruits” and “thou shall not muzzle the ox that treads the corn”, workers became immediate beneficiaries of the economic and political changes in the land. At the time, my lecturer in Macroeconomic Theory, Professor P.A. Olomola remarked during a January 2001 lecture, “this last Christmas was the best that many workers have had in about 15 years”. Truly, December of year 2000 followed the implementation of the N7,5000 minimum wage instituted by the Obasanjo administration. He pointed out that the administration would succeed at resuscitating Nigeria’s then virtually extinct middle class.
The remaining years of that administration were marked by economic prosperity and relative price stability to the point that in 2003, the economy achieved a 10.3% GDP growth. Though the economy ran into some turbulence in 2008/9, the crisis was short lived and growth never stalled until the first quarter of 2016. While the prosperity lasted, there were two main developments: one was glaring, the other was less obvious. The structure of the economy witnessed major shifts that were not immediately captured in the data. Two the infrastructure base to support Nigeria’s fast-growing economy was largely neglected. For example, roads deteriorated in quality and electric power supply went from bad to worse, as population grew from about 140 million in 2006 to an estimated 186 million by end of 2016.
In 2017 just as in the early 2000s, the working class is once again at the receiving end of developments driven by factors over which it has little or no control. More recently, the naira has lost over half of its foreign exchange value and much more of its local purchasing power. Yet, the past ten years have witnessed very little (if any) growth in the naira income of workers relative to prices. For example, in 2005, a decent small-sized sedan vehicle sold for N3.6 million. This was roughly twice the starting annual gross pay for an entry-level position in a Tier 1 bank at the time. Fast forward to 2017, the current version of the car sells for about N19 million. This is more than 7 times the annual gross pay for an entry level staff in a bank (if we assume entry level pay of N2.5m per annum)!
Prices of other items on the market don’t tell a better story. A dollar in 2005 was about N135 naira in the parallel market. Today it’s around N470 (let’s for a moment ignore the recent bump to N520). Thinking of young graduates who wish to sit for CFA, FRM, ERP or other foreign professional certifications helps put this in context. Let’s think of the price of milk, a good quality shirt, a bag of rice, transport costs within the city, school fees, and residential rents. In most developed countries, prices and costs rise only slowly, and compensation is often adjusted for inflation effects. In Nigeria, prices in recent years have spiked and compensation in most organizations have, at best, risen slowly. More commonly, salaries have been stagnant, reduced, delayed or otherwise diminished as businesses struggle with higher operating costs and thinner margins. These are facts and the effects are not less glaring.
The past 5-7 years have witnessed a large exodus of some of Nigeria’s best hands and minds in especially in service and knowledge sectors. The UK and Canada, for example have been major beneficiaries of this latest round of “brain drain”. The allure of stronger currencies and steadily rising income is real and its cumulative effects over a 15-year period cannot be ignored.
Another glaring effect is the widespread instance of vacant residential apartments. From Oniru to Ogudu, to Maryland, Magodo, Ikoyi, Lekki, Ajah, there’s an abundance of unoccupied houses. About ten (or even seven) years ago, finding a good vacant apartment in Lagos used to be a tough battle. When you eventually get one, you make haste to pay, or a faster fellow beats you to it. Lagosians called it “house hunting”. These days, vacant apartments are plentiful. And why is this so? There are both supply-side and demand-side causes.
On the one hand, there is an oversupply of mainly high-end developments funded by a combination of bank lending and the flow of easy money during the 2009 to mid-2014 oil price boom. The demand-side causes are equally glaring. With the rapid rise in working-age population, and the number of workforce joiners between 2005 and 2010, the high vacancy rate requires explanations. It’s possible that new entrants into the labour force did not find the right jobs, lost their jobs, got jobs but made less than sufficient progress on a crowded ladder, or they simply decided to live and then build on the outskirts rather than pay what, relative to their limited income, has become exorbitant rents. There is also the factor of “should-be” tenants who have left the country in search of greener pastures.
What does all this imply? The continued economic prosperity of the working class is crucial for sustained economic development in any country and Nigeria will not be an exception.
(to be continued).
David Adeoye, CFA
