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Why are Nigeria’s labor unions up in arms? | Business and economic news
Nigeria’s unions this week began a nationwide strike, shutting down the country’s power grid and halting flights, while resorting to drastic measures to pressure the government to raise minimum wages amid a cost-of-living crisis.
Unions suspended their indefinite strike on Tuesday after government officials invited them to negotiations, as industrial action affected power supplies to the country’s 200 million people and left thousands stranded due to the cancellation of flights.
Negotiations have so far yielded no results. “They didn’t present anything [new] yet,” Festus Osifo, one of the unions’ leaders, told journalists on Thursday. Labor leaders have vowed to force another shutdown again from next week if the government does not agree a minimum wage.
So what are the sticking points in negotiations between the government and unions as a new strike deadline approaches?
Passengers react as they are trapped at the gate of Nnamdi Azikiwe International Airport after Nigerian unions began an indefinite strike in Abuja on June 3, 2024 [Kola Sulaimon/AFP]
What happened and what are the demands?
On Monday, two of Nigeria’s main trade unions – the Nigeria Labor Congress (NLC) and the Trades Union Congress (TUC) – jointly declared national industrial action. Labor officials, for the first time in Nigeria’s long history of strikes, went to the substations housing the country’s electrical grids, chased workers home and cut off power supplies across the country.
All airports, including two international ones, were closed. Workplaces and schools were closed and health services were disrupted. Crude oil production – Nigeria’s bread and butter – has also been halted, likely representing a loss of millions of dollars.
For months, unions – which represent public workers and employees of medium to large companies – have demanded an increase in the minimum wage to compensate for rising inflation.
Unions want the current monthly minimum wage of 30,000 naira ($20) to be increased to almost 500,000 naira ($336) – representing a 1,500 percent increase.
The government offered 60,000 naira ($40).
Although government negotiators considered the minimum wage increase “irrational”, union leaders justified the new amount. They say it is based on the current costs of an average family of six and that the total is affected by the current record inflation in Africa’s largest economy.
Reforms initiated by President Bola Ahmed Tinubu last year, including the devaluation of Nigeria’s currency, have caused inflation to soar, worsening the cost of living crisis in Africa’s most populous nation.
Monday’s strike followed the failure of months-long negotiations in mid-May.
Protesters hold signs during a protest in Abuja, February 27, 2024. Thousands of Nigerians demonstrated against the rising cost of living, at a time when the economic crisis leaves many struggling to buy food. Protesters hoped the nationwide protests called by the umbrella union the Nigeria Labor Congress (NLC) would increase pressure on the government, which introduced financial reforms last year that have hit people hard. [Kola Sulaimon/AFP]
Why is Nigeria experiencing a cost of living crisis?
It is the fourth time that Nigerian workers have gone on strike since May last year, when President Tinubu was first elected. Last August, resident doctors demanding better pay began a three-week strike that devastated the public health sector.
Although Nigeria is Africa’s largest economy and oil producer, decades of poor governance and corruption have drained the country’s coffers. Almost two-thirds of the population lives on less than 2 dollars a day.
Under Tinubu’s administration, however, the country experienced one of the worst cost-of-living crises ever, as food, transport and rent prices tripled last year.
A 50 kg (110 lb) bag of rice, a Nigerian staple, costs about 40,000 naira ($27) in 2023, but has reached about 100,000 naira ($67) this year. At 40 percent, the current food inflation rate is among the worst the country has seen in decades.
Desperate, some were forced to buy quality grains for animal feed, while others simply ate fewer meals. In one case, a mob attacked a commercial truck loaded with food, tearing up its contents in broad daylight.
Economists say the country’s problems are largely due to the weak performance of the naira against the US dollar. Given that previous governments failed to increase local production, Nigeria is dependent on imports and is particularly vulnerable to external shocks.
Insecurity in the north of the country, where armed groups operate, has also harmed agriculture and contributed to rising costs. Furthermore, previous President Muhammadu Buhari’s central bank flooded the market with cash, worsening the naira’s problems.
A general view of Nigeria’s deserted Federal Secretariat is seen after Nigerian trade unions began an indefinite strike in Abuja on June 3, 2024 [Kola Sulaimon/AFP]
Has President Tinubu made the situation worse?
In his campaign promises last year, Tinubu promised to stabilize the currency and revive the struggling economy. But new monetary policies implemented by the president on day one exacerbated the problems and led to the naira losing 60% of its value by February, analysts say.
The policies included an abrupt removal of costly, decades-old fuel subsidies that previous governments considered costly and unsustainable. Additionally, Tinubu devalued the naira twice, merging official and black market rates in an attempt to attract more foreign investment. But gains have been slow and the resulting inflation has stifled the economy.
“It is not correct to place all the blame on the Tinubu administration,” highlighted Oluseyi Awojulugbe, senior analyst at think tank SBM Intelligence, noting that the president inherited an economy in crisis. But Tinubu was to blame for failing to mitigate the expected consequences of the reforms.
“They advanced these policies without creating a social safety net to cushion the effect. The government could have given a salary bonus [or] has provided some subsidies to farmers facing high fertilizer costs,” she said.
Government reports in recent weeks have touted a brief recovery in the naira as a sign that the measures have paid off, noting that foreign investment has increased. But, Awojulugbe said, only short-term investments have increased, with investors still too insecure to commit to the long term.
“You cannot build our country on what economists call ‘hot money,’” she said. “What Nigeria needs is patient capital – long-term investments that allow more businesses to flourish and employ more people.”
What did the government say?
Authorities initially resisted the unions’ demands and said they would not go beyond the 60,000 naira ($39) proposal.
The unions’ demand would increase government wage spending by 9.5 billion naira ($6.1 billion), government negotiators said. Information Minister Mohammed Idris Malagi said he was capable of “destabilizing the economy”, although some analysts point out that Nigeria’s political class is excessively pampered and overpaid, with members of parliament earning around three times as much than members of parliament in the United States.
Following the shutdown on Monday, government negotiators quickly resumed talks with labor leaders and committed to a minimum wage “above” 60,000 naira. It is unclear how far authorities are willing to go.
Meanwhile, Senate President Godswill Akpabio, speaking in parliament on Tuesday, rebuked the union leaders and said the strike amounted to “economic sabotage”.
Some members of parliament also tabled a motion for “extreme” actions, such as shutting down electricity supplies, to be criminalized. One parliamentarian said he was certain that “a lot of people died” in closed hospitals during the two days of strike.
The network itself has collapsed due to mismanagement at least three times this year.
What is the next?
Over the next three days, union leaders will meet daily with government negotiators who are racing to present a final blueprint for President Tinubu’s approval within a week’s time. Progress appears to be slow as actual numbers have not yet been discussed, union leaders said.
Barring a conclusion that is acceptable to the unions, workers will likely go on strike again from next week.
Update: One Week Ultimatum, They haven’t presented anything different yet. FG shows Operation ooO! Don’t be for dey wires cho! Cho! Cho! A week is already coming. #Us DEMAND A MINIMUM WAGE NOW! pic.twitter.com/TrPYjSq7Ka
– Nigeria Labor Congress Headquarters (@NLCHeadquarters) June 6, 2024
There is speculation in the local media that the unions are willing to reach a 100,000 naira ($67) deal.
Is this an ideal number for Nigerians living in difficult times? Analyst Awojulugbe said this is a complicated question. Private companies, which employ most of Nigeria’s working population of 60 million, may struggle to pay a higher wage, she said, and some state governments are still struggling to pay the current minimum.
Additionally, more cash flow could also work against a central bank frantically trying to absorb excess cash and fight inflation, she noted.
Instead, many analysts say, unions should force the government to take more steps to force inflation down holistically, rather than pushing for higher wages. For the government, it is a dead end as it appears determined to implement a policy that could put pressure on Tinubu’s reforms.
“Whatever salary is agreed upon will put more money in the hands of Nigerian workers and we all know what happens when you have too much money to chase too few goods,” Awojulugbe said.
“The resulting inflation will mean there will be another need to review the minimum wage again. And so the cycle continues,” she said.
The spotlight next week will shift somewhat to the Federal Reserve’s second-quarter earnings season and monetary policy. Market watchers will be treated to results from several major names, including Dow 30 components Goldman Sachs (GS), UnitedHealth (UNH), Johnson & Johnson (JNJ) and American Express (AXP), along with streaming giant Netflix (NFLX).
The Fed will still attract some attention as investors will be eager to hear from a packed lineup of central bank speakers just before the policy meeting lockout period.
In terms of the economic calendar, after fifteen days of labor market and inflation indicators, activity data will gain momentum in the form of the latest retail sales and industrial production reports.
Earnings Highlight: Monday, July 15 – Goldman Sachs (GS) and BlackRock (Black). See the full earnings calendar.
Earnings Highlight: Tuesday, July 16 – UnitedHealth (UNH), Bank of America (BAC), Progressive (PGR), Morgan Stanley (IN), PNC Financial (PNC) and JB Hunt Transport (JBHT). See the full earnings calendar.
Earnings Highlight: Wednesday, July 17 – Johnson & Johnson (JNJ), US Bancorp (USB), Morgan Children (KMI), United Airlines (UAL) and Ally Financial (ALLY). See the full earnings calendar.
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Earnings Highlight: Friday, July 19 – American Express (AXP), Halliburton (THANKS) and Travelers (VRT (return to recoverable value)) See the full earnings calendar.
IPO Observation: Hospital and healthcare clinic operator Ardent Health Partners (TARDT), insurance service provider Twfg (TWFG) and the biotechnology company Lirum Therapeutics (LRTX) are expected to price their IPOs and begin trading next week. The analyst quiet period ends at Rectitude (RECT) to free up analysts to publish ratings.
Police cars outside the residence of Thomas Matthew Crooks, the suspected shooter at a Trump rally on Saturday, investigate the area in Pennsylvania. Following the incident, one rally attendee was killed, two rally attendees are in critical condition and Donald Trump suffered a non-fatal gunshot wound. The shooter is dead after being shot dead by the United States Secret Service. (Photo by Kyle Mazza/Anadolu via Getty Images)
Investors will initially favor traditional safe-haven assets and may lean toward trades more closely tied to former President Donald Trump’s chances of winning the White House after he survived an assassination attempt, according to market watchers.
“There will undoubtedly be some protectionist or safe-haven flows into Asia early this morning,” said Nick Twidale, chief market analyst at ATFX Global Markets. “I suspect gold could test all-time highs, we’ll see the yen being bought and the dollar, and flows into Treasuries as well.”
Early market commentary suggested Trump’s shooting at a rally in Pennsylvania on Saturday could also prompt traders to increase his likelihood of success in the November election. His support for looser fiscal policy and higher tariffs is generally seen as likely to benefit the dollar and weaken Treasuries.
An indicator of market sentiment heading into the weekend: Bitcoin surged above $60,000, likely reflecting Trump’s pro-crypto stance.
Other assets positively linked to the so-called Trump trade include stocks of energy companies, private prisons, credit card companies and health insurers.
Traders will also be closely watching market measures of expected volatility on Monday, such as those in the tariff-sensitive Chinese yuan and Mexican peso, which have begun to price in the U.S. vote.
Trump said he was shot in the right ear after a shooting at his rally. His campaign said in a statement that he was “fine” after the incident, which prompted him to rush off the stage.
“Currencies will be the first major market on Monday in Asia to react to the weekend’s shots. There’s potential for extra volatility, and getting a clear reading could be especially difficult because liquidity will be hurt by Japan’s national holiday,” said Garfield Reynolds, Asia team leader for Bloomberg Markets Live.
Strategists had already expected a volatile run-up to the election, particularly as Democrats are still agonizing over President Joe Biden’s candidacy after his poor performance in last month’s debate raised questions about his age. Investors were also grappling with the possibility that the election could end in a drawn-out dispute or political violence.
But there is little precedent for events like those in Pennsylvania. When President Ronald Reagan was shot four decades ago, the stock market plunged before closing early. The next day, March 31, 1981, the S&P 500 rose more than 1% and benchmark 10-year Treasury yields fell 9 basis points to 13.13%, according to data compiled by Bloomberg.
Bond investors should pay particular attention as the attack is likely to boost Trump’s election chances and ultimately lead to concerns about the fiscal outlook, according to Marko Papic, chief strategist at California-based BCA Research Inc.
“The bond market must at some point become aware of President Trump’s greater chances of winning the White House than any of his rivals,” Papic wrote. “And I continue to believe that as his chances increase, so too must the likelihood of a bond market revolt.”
Kyle Rodda, senior financial markets analyst at Capital.com, said he was seeing client flows into Bitcoin and gold following the shooting.
“This news marks a turning point in American policy norms,” he said. “For markets, it means safe-haven trades, but more tilted toward non-traditional safe-havens.”
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Jio Financial share price: Should you buy this Reliance group stock on Monday ahead of Q1 FY2024 results?
Q1 2024 Results: Jio Financial Share Price will be in focus on Monday as the Reliance Group company has a fixed board meeting on July 15, 2024 to consider and approve the company’s unaudited standalone and consolidated financial results. Trust Group company informed about the Q1 2024 Results date on Wednesday last week via an exchange filing. According to stock market experts, Jio Financial Services Limited is poised to deliver impressive Q1 results for FY25 on solid operating income. They have forecast a healthy QoQ PAT for the company in Q1 FY25.
Jio Financial Services News
Speaking on the Jio Financial Services Q1 2024 results, Manish Chowdhury, Head of Research, StoxBox, said, “We believe Jio Financial Services is poised to deliver impressive results in Q1FY25 aided by its operating income, which is likely to show robust growth driven by strong investment income, which in turn should lead to healthy PAT growth on a sequential basis. Jio Financial Services continues to make strategic moves such as launching digital products and expanding its ecosystem, with a clear focus on future growth. The company has announced plans to introduce products for lending against stocks and mutual funds, leveraging Jio’s large user base, which could be a significant growth driver in the coming quarters.”
“Furthermore, with the NBFC receiving RBI approval to become a primary investment company, Jio Financial Services is well-positioned to unlock value from its investments. Overall, we expect the company to report robust numbers in the upcoming quarter,” the StoxBox expert added.
Jio Financial Stock Target Price
Speaking about the technical outlook of Jio Financial share price, Ganesh Dongre, Senior Manager, Technical Research at Anand Rathi, said, “Jio Financial Services share price is poised to make a fresh high at the ₹260 apiece level. If the stock breaks above this mark, the Reliance Group stock could make a fresh high by touching the ₹290-₹295 zone. Hence, those with Jio Finance stock in their portfolio are advised to stick to the script by keeping a stop loss at ₹205. If the stock breaks above ₹260 decisively, then one can upgrade the stop loss at ₹240 for the near-term target of ₹295.”
On the advice to new buyers regarding Jio Financial stock, Ganesh Dongre said, “New buyers are advised to wait for the breakout. Once the stock breaks above ₹260, one can buy this Reliance Group stock at the short term target of ₹295, keeping a stop loss of ₹240 apiece.”
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage firms, and not of Mint. Investors are advised to consult with certified experts before making any investment decisions.
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