Friday 3 May 2024

The Udoji Deal: A Lesson From The Past On Government-Workers Relations in Nigeria

Article title from The Tennessean, Friday, March 21, 1975.

“Udoji means pay rise today, but tomorrow it will mean inflation.”

- Alan Rake, Editor of African Development, writing for The Ottawa Journal, March 7, 1975.

The present imbroglio surrounding negotiations between the Federal Government of Nigeria and the major labour unions of the country amid a cost-of-living-crisis bring to mind a key moment in the history of government-labour relations. This was the recommendation in 1974 by the Jerome Udoji-led Public Service Review Commission that civil servants be given a generous pay increase. However, the backdrop to the circumstances surrounding the Udoji pay rise of the mid-1970s and that which exists today could not be more different. Whereas in the first half of the 1970s, most Nigerians were optimistic about the increase of individual prosperity and wider national economic attainment, the present feeling is largely one of enveloping penury and pessimism about the future. In the Udoji era, the increasing national wealth owing to a boom in oil prices encouraged a confidence that workers would maximise their earnings while today the focus and the struggle is about obtaining a living wage. Yet, both eras have something in common; that is the signal failure of Nigeria’s political and economic leaders in presenting a comprehensive plan that will transform the country from a consumer-oriented, resource rental economy into a self-reliant, productive one.

The period leading up to the ill-famed report by the Public Service Review Commission headed by Chief Jerome Udoji was a largely positive one for Nigeria. Reunited after a bloody civil war and its confidence in national reconstruction bolstered by the burgeoning profits from the oil industry, Nigeria appeared to be on the cusp of great things. There were of course a great number of negative phenomena blighting the country, one of which had been the post-war upsurge in armed robberies. Thus, the words “Bar Beach Show” simultaneously referred on the one hand to the macabre episodes where convicted robbers were publicly executed at a location on the Lagos seafront, and on the other to a light entertainment television show hosted by the musician Art Alade.

Other marked social and economic problems included the congestion of ships at Lagos wharf including the money-draining “Cement Armada” scandal during which queues of ships waited months to offload their cargo; uncontrolled urban expansion in the Lagos metropolis which led to an unclean environment; and the hugely oppressive daily grind of traffic gridlock. The public also had to contend with a notable expansion in corrupt practices.

Perhaps the greatest stimulus which led to the idea of providing workers with a pay increase was the hike in oil prices which was a consequence of the oil embargo instituted by Arab nations following the Arab-Israeli War of October 1973.

By the start of 1974, Nigeria was producing two million barrels of oil a day with more than 900 wells producing crude which was low in sulphur content. It was taking 12.5% in cash on all oil extracted by foreign-owned companies. However, the government sensed a greater opportunity in directly entering the petroleum export business by taking the nation’s royalty in the form of oil barrels and selling it through the Nigerian National Oil Corporation (NNOC).

By the standards of the time, the regime led by General Yakubu Gowon had shrewdly boosted oil income by striking participation agreements with new entrants to the oil extracting field. This began with Elf and Phillips/ENI in 1971. When Arab Gulf states obtained a 25% share in participation, Nigeria went on to negotiate a 35% stake in Shell-BP. Later, the terms of contract changed to 100% controlled concessions in which foreign operators would be offered a share of the output. By now the world’s seventh largest oil producing country in 1974, Nigeria’s total oil revenues were projected to amount to $8 billion, compared to $1 billion three years before.

The Udoji Commission was set up in 1972 at a time when a government-imposed pay freeze was in effect after the pay increase of 1971. It was focused on the civil service and its terms of reference required that the commission make recommendations regarding the training of civil servants, personnel policies and remuneration. It was also widely expected to propose pay increases and the establishment of a minimum wage.

Udoji submitted the eight-volume report to the Federal Military Government in September 1974, and its recommendations were studied by the Supreme Military Council and the Federal Executive Council before a decision was announced just before the new year.

While awaiting the government’s verdict a dispatch from the New York Times published on Boxing Day stated that it was “generally felt that the government would not grant civil servants pay rises without recommending similar increases for those who were employed in the private sector.” But this would not be the case. The commission awarded pay increases only to public sector employees. Lower tier civil servants received a pay increase of 130%, those in the intermediate ranks 30% and the higher echelon 100%. All increases were backdated to April 1st, 1974, and paid in one lump sum in January 1975. This cost the Civil Service N466 million ($583 million).

Among the aims of this extraordinary decision was to put the civil service in a position to play a dynamic role in the fast developing economy, as well as to assure the public that the people would have a direct share in the growing national wealth.

But the rise proved to be a recipe for disaster.

The government had not learned from Nigeria’s history. The review of 1971 and earlier reviews dating back to the colonial era demonstrated that substantive pay awards made to the civil service inevitably brought a cascade of pay demands from the private sector including industrial labourers.

However, unlike in previous periods, Nigerian trade unions were now much better organised and united. Thus, the backlash came in the form of wildcat strikes and the imposition of work-to-rule regimes. “Udoji” entered into the lexicon of language, denoting a “pay rise” and workers outside of the public sector demanded their own “Udoji.” Port workers were quick to withdraw their labour and they were followed by bank workers. The closure of banks exacerbated the situation because other workers could not be paid. Workers at Kainji Dam, the hydro-electric power project, downed their tools and plunged the nation into two nights of darkness. Workers providing medical services and other private sector employees also went on strike. The unrest worsened by a strike called by drivers in the transport industry who claimed to be suffering harassment from police after the government’s decision to set up mobile courts in order to try on-the-spot traffic offences.

It was under these circumstances that the military government, which had positioned troops around the Central Bank, called a meeting with business leaders. Major General Hassan Katsina, the deputy Chief of Staff Supreme Headquarters, met with members of the Nigerian Chamber of Commerce. The military government acknowledged that it had no choice other than to extend the pay rise to the private sector and suggested that it meet a minimum 30% increase.

However, there was a problem here. Although the pay increase given in 1971 had been followed by a pay freeze, the private sector found a way around this, so much so that some corporate executives were earning twice the salaries of Nigeria’s “super” permanent secretaries. They have improved their workers' conditions and could not afford paying them nine months back pay. Moreover, many small firms, at least half of around 600, that had recently completed takeovers of European-owned businesses under an indigenisation decree, were still paying off the arrears to the foreigners they had bought out and were in no position to afford Udoji-type pay rises.

At one point the government seriously considered meeting the cost of a retrospective pay rise to the private sector. It is worth bearing in mind that the public sector in Nigeria accounted for only 20% of the working population. Yet, with almost 3,000 petro-nairas earned since the October War of 1973, the government was in a position to be generous.

By March 1975, the increases were having an effect on inflation, the highest that it had been since the civil war. Although officially running at 13% - the same as that of the United States- the Associated Press reported that the true figure was believed to have been approximately 30% and was expected to hit 40% by the year’s end. A tin of milk at this time had doubled from 15 cents per can to 30 cents. A 2.2 pound bag of sugar which had previously cost 32 cents was now 78 cents.

A snapshot of how inflation was blighting ordinary Nigerians was provided by one Fola Adu, the owner of an open-front shop in Lagos, who had four children with her husband, also a small trader. She said the following:

Before Udoji we managed on housekeeping of about $50 per month. But now it averages out at about $160 for us to eat a balanced meal three times a day. Neither my husband nor I qualified for Udoji. I have had to compensate by raising prices to the levels they are elsewhere in town. Even so, I can hardly afford any clothes for the kids this Easter or even replace torn ones.

To underline the fact that the government had not learned from the past, Dr. Michael Omolayole, the then Chairman of the National Institute of Management, enlightened the Ottawa Journal about the burdens typically imposed on the ordinary Nigerian by awards granted in the past by Udoji-style commissions:

Before the announcements of these awards were made there were increases in the price of commodities. When they are announced there are further increases. As soon as they are paid, there are more increases. That is triple increases before the workers actually come round to spend the money.

Farmers were also affected. In the former Western State farmers set up roadblocks to prevent other farmers from transporting crops to market until they received guarantees that the price of cash crops would be substantially increased in order to meet the rocketing cost of living.

Among the solutions proffered at the time was one by the Governor of the Central Bank, Clement Isong, who suggested that the government tackle inflation from the supply side rather than the demand side because there was no means to prevent the government from spending the huge revenues it was earning from oil and also no mechanism for preventing workers from spending their enhanced salaries. Thus, he advocated a massive capital investment programme to boost agricultural production, increased imports, more bank loans to encourage production and more effective distribution of food by the state-owned National Supply Company, all of which he felt would help stabilise prices.

But the Gowon regime failed to redress the situation and by April 1976, the economy had begun to contract, and its international balance-of-payments position was deteriorating while inflation was riding at 40%.

Gowon, who would be overthrown by a bloodless coup in July of 1975, had prior to his removal had announced a massive $44,000 million five-year development plan which was described as “the biggest, boldest and most promising in Black Africa”. If it was an attempt at a distraction from the immediate issues that his government faced on the economic front, then it was a futile one.

Half a century later, the present civilian administration led by President Bola Tinubu is contending with Nigeria’s trade unions over the question of a minimum wage. The backdrop is one of economic malaise characterised by the rapid depreciation of the Naira, high food inflation and long petrol queues. These have flowed from Tinubu’s policy of deregulation which was spearheaded by the removal of the longstanding petrol subsidy and the unification of the foreign exchange windows through which the Naira was floated.

The mechanisms which have succeeded the Udoji-style review process, namely the Minimum Wage Act of 2019 and the Tripartite Committee on National Minimum Wage are presently not functional because the Act has expired, and the recommendations of the committee have not been implemented. While the country awaits an agreement on the minimum wage, the government has introduced palliative measures designed to ease the immediate burdens on the vulnerable such as the distribution of essential foods.

Yet, while the present crisis may ease at some point in the future the long-term economic prospects will remain dim if Nigeria, as has been the case throughout its 63-year old existence as an independent nation, continues to fail to map out a long-term plan which will position itself to develop an industrial base.

As was the case during the Udoji-era of the 1970s, it is an import-dependent economy. It consumes more than it produces. The development plan unveiled in 1975 by the military regime of General Gowon was a missed opportunity because it failed to lay down the foundational basis of transforming the country into a fully industrialised country. This should have encompassed the development of chemical, manufacturing, and technological industries alongside a mechanised agricultural sector. A comprehensive development plan would necessarily have aimed to implement a complementary project to educate the population to a level beyond basic literacy.

The revenues accrued from strengthening industrial capacity, including the maximising of steel production and electrical generation, would be used to pay for the aforementioned policy of mass education. This enterprise in training would encompass basic, vocational and university education so as to produce the requisite level of professional and technical expertise to sustain an industrial economy and society.

Unfortunately, Nigeria’s contemporary leaders including President Tinubu do not have this vision. His ascertainable goals do not provide a clear pathway to developing Nigeria to the point of self-sufficiency. The Renewed Hope Infrastructure Development Fund which he established as a means of facilitating the development of infrastructure in areas such as agriculture, education and transportation does not go far enough since it is dependent on collaborations with foreign actors. His overtures to the leaders of the Samsung corporation bear this out. Attracting investment only serves to consolidate the dependency syndrome typical of African economies, one which is replete with the harmful practice of selling exploitation rights to Western and Chinese corporations.

Instead of relying on corporations such as Samsung, Nigeria should be aiming to raise capital internally and invest in locally conceived projects that will generate foreign exchange earnings. The proceeds would then be spent on building up indigenously operated capital equipment that would enable Nigeria to manufacture its own capital goods from raw materials to finished product within its local currency regime. It is only through this model of economic development that Nigeria will ultimately begin to produce globally competitive goods and services.

It is important for Nigeria’s leaders and its population to keep this in mind while the country deals with yet another cost of living crisis.

© Adeyinka Makinde (2024).

Adeyinka Makinde is a writer based in London, England.

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