As the nation anticipates President Bola Tinubu’s proposal for a new minimum wage to be presented to the National Assembly, concerns are rising that implementing this wage could financially cripple many states.
Last Tuesday, the Federal Executive Council postponed a decision on the tripartite committee’s minimum wage report to allow for further discussions between the federal and state governments, the private sector, and labor unions.
President Tinubu also met with governors at the National Economic Council meeting chaired by Vice President Kashim Shettima. Although the meeting was expected to address the national minimum wage, it remained silent on the issue. The Southern Governors’ Forum, in a communiqué from their meeting in Abeokuta, Ogun State, advocated for individual states to negotiate their minimum wages with their respective workforces.
Labor unions have voiced concerns over the Nigeria Governors’ Forum’s (NGF) influence on the minimum wage negotiations. The NGF Secretariat’s report, titled “Analysis of State FAAC Inflows and State Expenditure Profile,” warned that the new minimum wage could bankrupt states due to increased recurrent expenditures. The report highlighted that states like Abia, Ekiti, Gombe, Imo, Katsina, Kogi, Oyo, Plateau, Sokoto, Yobe, and Zamfara already faced deficits in 2022 due to high recurrent costs.
The report predicted that a 50% increase in recurrent expenditure would push 13 states into deficit, leaving only 10 financially stable. The proposed N62,000 minimum wage, more than double the current N30,000, could leave only a few states, such as Anambra, Bayelsa, Borno, Ebonyi, Gombe, Imo, Jigawa, Kaduna, Lagos, and Rivers, with positive net revenues based on 2022 data.
Net revenue, the difference between total revenue and recurrent expenditure, determines whether a state has a surplus or deficit. Total revenue includes funds from the Federal Account Allocation Committee, internally generated revenue, aids, grants, and constituency development funds.
Documents obtained by The PUNCH revealed significant state expenditures. For instance, Abia, with 58,631 workers, spends N5.8 billion on wages monthly. Anambra, employing 20,541 workers, spends N1.8 billion monthly on wages, along with pension and debt servicing obligations totaling over N3.3 billion. Bayelsa’s 48,213 workforce incurs over N10.5 billion monthly in recurrent expenditure.
Other states show similar financial strains. Benue spends over N66.8 billion monthly on its workforce of 13,366. Delta, with 50,871 workers, faces an enormous N82.9 billion monthly recurrent expenditure. Jigawa, Katsina, Kwara, and Niger also report substantial monthly expenditures, affecting their financial stability.
The financial health of states varies widely. Lagos leads with N1.24 trillion in revenue against N621 billion in expenditures. In contrast, Kebbi, with the lowest revenue of N92 billion, spends N57.6 billion on recurrent costs. Poor internally generated revenue (IGR) compounds the issue for states like Zamfara, Kebbi, Taraba, and Yobe.
Despite these challenges, 15 states have not implemented the N30,000 minimum wage, even four years after its enactment. BudgIT’s report highlighted a 13.44% increase in personnel costs across states in 2022, reaching N1.75 trillion from N1.54 trillion in 2021. However, the revenue of the 36 states collectively grew by 28.95% to N6.6 trillion in 2022.
The IGR of the states grew by 12.98% to N1.82 trillion in 2022, though this increase was uneven, with 17 states experiencing declines. The Nigeria Labour Congress (NLC) has criticized many state governors for flouting the Minimum Wage Act, naming states such as Abia, Enugu, Bayelsa, Delta, and several others as non-compliant.
In response, some states are taking action. Enugu commenced full payment of the N30,000 minimum wage for all workers in February 2020. Similarly, Zamfara State Governor Dauda Lawal announced the implementation of the N30,000 minimum wage starting June 2024.
As the nation awaits further developments, the debate over the new minimum wage continues, with significant implications for the financial health of Nigerian states.
