New minimum wage implementation to boost aggregate demand – Uwaleke

The implementation of new minimum wage expected to impact positively on the nation’s capital market.

Professor of Finance & Capital Market, and head, Banking and Finance Department, Nasarawa State University, Keffi, Professor Uche Uwaleke who made this remark in Lagos said that the 67 per cent increase in the national minimum wage will lift disposable income and boost aggregate demand.

Explaining on how minimum wage increase will impact on the market, he said “’ this is the time to take position, the minimum wage will be positive for the capital market, inflation is caused by weak aggregate demand, but new minimum wage will rather boost aggregate demand, driven by greater number of people having more disposable income and also money to save.”

He further said that inflow from wages would be absorbed by the system while purchasing manager index will rise.

He, however, said that it is unlikely for the country to have another economic recession because the factors that contributed to the recession in 2016, are currently none existent.

Uwaleke who expressed optimism that there would be no recession and the nation’s economy would rebound this year said “crude oil price is not bad today, external reserve is healthy, we have stable exchange rate and inflation rate is at 11 per cent is healthy.”

He said that the CBN’s MPC decision triggered the market supportive move in March 2019, by bringing down MPR by 50 basis points, after 33 successive months, to 13.50 per cent from 14 per cent, adding that he sees prospects of further reduction in the MPR soon.

Insisting that reduction in rates would be good for the growth of the Small and Medium Scale Enterprises he said “Lower MPR will free funds for investments or lending to firms for expansion which will improve their earnings and deliver more value to investors. It has a way of attracting investors, opening the market and hedging risks, but high interest rate discourages investment” he stated. 

Uwaleke who also double as the President, Chartered Institute of Bankers of Nigeria (CIBN), Abuja branch, said there are lots of investors sitting on the fence to see the direction of the new government.

He however said that early and proper constitution of new cabinet in the government would determine the performance of the economy  contribute to the economic growth within the year.

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