Govt must remove tax on diesel to alleviate hardships – NECA boss

Govt must remove tax on diesel to alleviate hardships – NECA boss


The Director-General of Nigeria Employers’ Consultative Association, Mr Adewale Oyerinde, speaks with HENRY FALAIYE on the recent wage awards by the Federal Government, minimum wage and how to ensure industrial harmony going forward

 Following the N35, 000 wage raise for federal workers, what kind of salary adjustment is the private sector contemplating for their own employees?

Presently, the private sector has taken a decisive step in implementing a comprehensive financial reward programme. We are actively providing support, both in the form of cash and in-kind allowances, and we have gone the extra mile by adjusting salaries, even in sectors where such adjustments are unconventional. Additionally, we have introduced non-financial measures like facilitating remote work to alleviate the financial strain associated with transportation costs, among other initiatives. This initiative was launched in June and received recognition from the president during his August address, where he commended the private sector for its leadership role in enhancing employee welfare.

Turning to the issue of the national minimum wage, we have proactively addressed this matter and are well ahead in our discussions. It is regrettable that organised labour has not acknowledged or valued the organised private sector’s contributions in these conversations. In our case, we engage in negotiations for minimum wage every three years through collective bargaining agreements. Most private organisations have minimum wages that exceed the national minimum wage of N30, 000. Each sector within the private sector negotiates sector-specific minimum wages that significantly surpass the national benchmark. While we acknowledge the importance of a national minimum wage as a guiding principle, we remain committed to offering wages that far exceed the mandated minimum, despite the challenging environment currently faced by the private sector. Despite the multifaceted and existential challenges, we confront, we continue to outperform others in this environment.

What are the critical areas of focus that organised businesses prioritise?

Our foremost concern revolves around establishing clear and specific timelines for the disbursement of funds. A primary focus for us is how the government intends to address the challenges related to foreign exchange. Presently, the forex situation poses a significant obstacle to procuring essential inputs and is causing disruptions in our financial projections. The escalating forex issue is hindering progress, and until it is resolved, our endeavours cannot take flight.

Regarding the removal of the 7.5 per cent value-added tax, we view it as a measure that should be considered within the broader context of the government’s efforts to alleviate the hardships faced by Nigerians. Eliminating this tax would lead to a reduction in diesel costs, making transportation more accessible for all Nigerians and simplifying diesel-related expenses for both employers and employees. It is not just an intervention geared towards employers; it’s a measure aimed at benefiting all Nigerians. Currently, organised labour, whether in the public or private sector, represents less than five percent of the entire population. Therefore, any intervention should prioritise the welfare of the entire population, considering what immediate relief they can receive. We believe that the removal of the 7.5 per cent VAT on diesel serves as a palliative measure for all Nigerians.

Regarding the N75 billion fund proposed in an MoU for small businesses, we have confidence that the President’s announcement in August will be implemented. However, we do seek concrete and specific timelines for its implementation.

What is your perspective on the suspension of the organised labour strike?

We commend the suspension of the strike because we have consistently advocated that the strike will not serve any significant purpose from the perspective of the private sector, rather it will dig us deeper into the hole, considering the state of the economy and the state of the Organised Private Sector.  We hope that all the parties will live up to their obligations and commitments in the Memorandum of Understanding that was signed.

What steps do you believe should be considered to foster increased harmony within Nigeria’s industrial landscape?

To effectively address the lingering issues within Nigeria’s industrial relations system, several measures need to be implemented to foster greater harmony and resolve conflicts. These measures should originate from certain fundamental principles.

First and foremost, the establishment of a robust industrial relations policy is essential. Fortunately, such a policy already exists within the Ministry of Labour. However, to ensure its effectiveness, a revalidation process is necessary, involving the endorsement of all relevant social partners. This policy framework should encompass various aspects, including the recognition and respect for labour administration institutions. Two crucial institutions in this context are the Industrial Appropriation Panel and the National Industrial Court. These specialised courts are designed to address and resolve disputes related to industrial matters. It is of utmost importance that all stakeholders understand that the IAP and NIC are exclusively intended for this purpose and must be treated with the utmost respect. They are not accessible to ordinary individuals in society but serve as specialised mechanisms to facilitate peaceful industrial conflict resolution.

Furthermore, capacity building is a critical element in addressing the challenges within the industrial relations system. Currently, there is a lack of knowledge and understanding among social partners regarding their roles and responsibilities in this context. Therefore, a deliberate effort must be made at all levels to bridge this knowledge gap. This includes providing training and education to enhance the understanding of the roles and obligations of all parties involved in industrial relations, from workers and employers to government agencies.

Do you expect the economy to fully recover from fuel subsidy removal within six months of intervention?

The expectation is that the public is not informed about the discussions that took place between the labour unions and the government, resulting in the agreed-upon six-month intervention. However, the concern is what will happen after this six-month period. There is uncertainty about when employers will cease these interventions for their employees since they did not specify whether it would last for three months or six months. We have been drawn into a six-month commitment without a clear plan for what comes next.

Are we assuming that the Port Harcourt petroleum refinery will start operating in December, as the President suggested? If it does, it could reduce the reliance on petroleum imports and potentially lower product prices. Additionally, are we assuming that Dangote Refinery will also be operational by December? It is worth noting that Dangote Refinery operates within a free trade zone, which allows it to potentially sell products at international prices. What discussions are taking place with Dangote to ensure that our Port Harcourt Refinery’s operation in December won’t directly compete with or disrupt the investment of another Nigerian entrepreneur?

This concern is not limited to the current government; it predates it. When making policy recommendations or decisions, it is crucial to consider their broader impacts. Otherwise, we may see unintended consequences. For instance, increasing wages without addressing the rising cost of doing business could lead to two problems: higher production costs and an increase in unsold stock. Currently, the manufacturing sector has over N200 billion worth of unsold products, which may eventually expire. Businesses that have taken loans or credit must continue paying interest, even if their stock remains unsold.

In the long run, these businesses may have to consider downsizing to ensure sustainability. While it may seem like a positive step to increase salaries, it can lead to downstream challenges, such as rising unemployment. The key issue here is that we need to comprehensively address these interconnected issues, and this can only happen when all stakeholders are involved in the discussions and decision-making process.

You mentioned the government’s efforts to support the private sector with measures such as the N75 billion intervention fund for small businesses and the temporary suspension of the 7.5 percent VAT on diesel. Can you please clarify whether these actions reflect a significant commitment to assisting the private sector?

It is crucial to understand the nuances of bipartism and tripartism in the context of negotiations and engagements, both of which are legally valid approaches. Bipartism typically involves discussions between the government and organised labour, focusing on issues that concern both parties. However, tripartism broadens the scope to include concerns of all stakeholders. In tripartism, the principle is that decisions cannot be made on behalf of any party not present, as no one understands their priorities better than themselves.

For instance, during the COVID-19 pandemic, employers and organized labour engaged in a Memorandum of Understanding in a bipartite setting, agreeing not to downsize during that period. This was a conversation exclusively between employers and labour, without government involvement. When government or public sector workers become part of the conversation, it transforms into tripartism.

We also supported a conversation between government and organized labour, which resulted in recent developments that occurred last Saturday within the framework of bipartism. However, our concern lies not in the content of the MoU but in the process surrounding it. We believe that getting the processes right is crucial. Just like you cannot build a solid house on a shaky foundation, effective dialogue requires a solid foundation.

If a conversation involves the interests of employers, it’s imperative to include them. Organized labour does not represent employers’ interests, and vice versa. Regarding our priorities, there are specific issues we want the government to address. While we appreciate the temporary removal of the 7.5 per cent VAT on diesel, it may not be at the top of our priority list. No matter what wage award is granted, if we don’t address the sustainability of businesses, the rising costs of goods and services will offset any benefits for employees. This is the reality.

The temporary removal of VAT is a positive step to support the private sector, but any relief measures must be accompanied by efforts to enhance enterprise sustainability. It’s essential that the government addresses both aspects simultaneously increasing income and improving production to prevent them from cancelling each other out. Regrettably, the government has not taken both sides into account.


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