PRESIDENT Goodluck Jonathan, state governors and some legislators celebrated May Day with organized Labour, with the usual spectacle of march-pasts and copious speeches!  Labour, on one hand, demanded for positive results in the areas of employment, security and corruption, so that the Nigerian economy can survive and soar from the impact of good governance.

On his own part, President Jonathan surprisingly indicted his Economic Management Team, when he decried our touted economic growth without attendant job creation, and noted that “I agree totally that until we create jobs, until Nigerians can find food to eat, until Nigerians who are sick can walk to the hospitals and get treatment, the economic indices are meaningless to them”.

Nonetheless, Labour has traditionally reserved strike action, its ultimate weapon of coercion, primarily to instigate higher wages for its members and press its demands for reduced fuel prices.  Regrettably, however, the value of the modest wage increases has always been quickly eroded by unbridled double-digit rate of inflation over the years, as too much money chase less goods.  Ironically, success with Labour’s demands for controlled fuel prices also induce bloated subsidy payments in place of real infrastructural enhancement.

Consequently, it would be appropriate to examine whether or not higher wages and reduced fuel prices are possible without the anti-social excess baggage of inflation and subsidy.

Indeed, purchasing power of incomes can be enhanced simultaneously with lower fuel prices, if Labour’s strategy recognizes that a relentless ‘cash surplus’ economy is the fundamental reason why the N18,000 minimum wage currently purchases less than half of the goods and services that were possible a few years ago for the same amount.

Similarly, Labour’s advocacy must recognise the role of a manipulated naira exchange rate as the root cause of continuously rising fuel prices and the related wasteful subsidy component.

Although some Nigerians believe that fuel prices would tumble if government built new refineries, this will not necessarily be so; our national experience is indicative that we do not run public corporations with the required discipline.  Consequently, any call for government investment in more refineries would be tantamount to turning back the hands of the clock, and further entrenching corruption and mediocrity in governance at the expense of the people!

However, Organised Labour’s demands on this year’s May Day specifically calls for increasing employment opportunities and effective control of insecurity and corruption in governance.

Incidentally, the major factors that could drive employment include a healthy consumer demand base, such that the wages of income earners would command stable or increasingly stronger purchasing values, so that workers have access to more of a wider range of ‘cheaper goods’. Increasing consumer demand would consequently motivate existing entrepreneurs to expand production and also attract new investors into the market, with more job opportunities in tow!

Nonetheless, such increasing consumer demand may still fail to instigate employment opportunities, if double-digit interest rates (high cost of funds) discourage investments.

Paradoxically, increased purchasing power of stable incomes (i.e. reducing inflation) or indeed, provision of low cost of funds for the real sector, hardly feature prominently in Labour’s advocacies.

Instructively, however, both high inflation and interest rates are the results of poor management of the amount of cash or liquidity in the economy. For example, while inflation is the product of too much money chasing fewer goods, high cost of funds is instigated by the high Monetary Policy (control) Rate that CBN imposes to cage inflation, by restraining access to the perceived high cash volumes in the system.

Clearly, however, the causative link between rising unemployment levels and heightened insecurity is already well established in public consciousness, particularly as unemployment amongst the “youth population has assumed a very negative dimension with serious consequences on national peace and progress”.

Corruption, which Labour also identified for serious remedial attention, is equally facilitated by the excessive level of easy cash available and the weak sanctions for financial impropriety. For example, while a church rat is lean and shorn of excess fat, the bakery rat, like the ‘fat cats’ in our system, would continue to remain obese because of the liberal availability of ‘bread’ and ineffective mousetraps in their habitat.

So, instructively, availability of surplus cash ironically turns out to be a major root cause of low purchasing power of incomes, and high cost of funds. This systemic cash surplus intrinsically also facilitates corruption and rising unemployment, which ultimately engenders insecurity.

Incidentally, the plague of ‘surplus’ cash (excess liquidity) in the system is also responsible for rising fuel prices and the wastage of over N2 trillion subsidy payments annually.

In essence, CBN’s relentless substitution of monthly naira allocations for dollar-derived revenue instigates a continuous horrendous supply of naira, which provides excess cash supply to banks. Thus, CBN’s misguided payments arrangement also continuously pitches increasing surplus naira revenue against the rationed weekly dollar auctions of the apex bank; the resultant market imbalance ultimately weakens the naira exchange rate and inadvertently pumps up fuel prices with bloated subsidy values as collaterals.

The foregoing analysis clearly identifies CBN’s monopoly of the foreign exchange market as the common cause of ‘excessively’ surplus naira as well as the major determinant of low purchasing power of wages and consumer demand. Furthermore, high cost of funds, unemployment and insecurity are also the ulterior products of excess liquidity, while the systemic cash surplus is similarly responsible for a weaker naira exchange rate, which in turn instigates high fuel prices and the related astronomical subsidy values.

Consequently, Labour’s seemingly intractable problems would be resolved if CBN effectively manages the source and reduces the prevalent excess naira liquidity by adopting the instrument of dollar certificates for payment of monthly allocations of dollar-derived revenue. In this manner, the oppressive hydra-headed ghost of excess liquidity will disappear and the impediments to low inflation and interest rates would be removed. The naira exchange rate will become stronger and boost the purchasing power of all wage earners, while domestic petrol prices will fall below the current price of N97/litre, so that erstwhile subsidy payments of over N2 trillion annually will become available for infrastructure! Furthermore, low cost of funds and increasing demand will become possible to drive expansion of industrial production as well as increasing job opportunities. Ultimately, Labour Union membership will increase, while government tax revenue will rapidly swell from the ensuing bourgeoning commercial and industrial activities.

The question, however, is, will Labour ever recognize the side on which its bread is buttered?

• Boyo, a public finance analyst, wrote from Lagos.