As the nation anticipates the new minimum wage proposal promised by President Bola Tinubu to be sent to the National Assembly, concerns are growing that its implementation could lead to financial strain or bankruptcy for many states.
Last Tuesday, the Federal Executive Council deferred a memorandum on the tripartite committee’s report concerning the new minimum wage. This decision was made to allow further consultations between the federal and state governments on one side and the private sector and labor unions on the other.
On Thursday, Tinubu met with governors at the National Economic Council meeting, chaired by Vice President Kashim Shettima. While the meeting was expected to address the national minimum wage, there was no confirmation that the issue was discussed.
The Southern Governors’ Forum, during its meeting in Abeokuta, Ogun State, also released a communiqué asking for each state to negotiate the minimum wage with its workforce.
Labor unions have expressed concerns over the Nigeria Governors’ Forum’s influence on the minimum wage negotiations. A report titled “Analysis of State FAAC inflows and state expenditure profile” from the Nigeria Governors’ Forum Secretariat warned that the new minimum wage could push states into bankruptcy due to increased recurrent expenditure. The report indicated that in 2022, states like Abia, Ekiti, Gombe, Imo, Katsina, Kogi, Oyo, Plateau, Sokoto, Yobe, and Zamfara already faced deficits due to high recurrent expenditure. The report predicted that a 50% increase in recurrent expenditure could result in 13 states falling into deficit, leaving only 10 states financially stable.
The tripartite committee’s recommendation of a N62,000 minimum wage represents a significant increase from the current N30,000, potentially leaving only a few states like Anambra, Bayelsa, Borno, Ebonyi, Gombe, Imo, Jigawa, Kaduna, Lagos, and Rivers with positive net revenues based on 2022 fiscal data.
Net revenue is calculated by deducting recurrent expenditure from the total revenue of the state. A positive net revenue indicates a surplus, while a negative one indicates a deficit. Total state revenue is derived from the monthly revenue from the Federal Account Allocation Committee, internally generated revenue, aids and grants, and constituency development funds.
Abia employs about 58,631 workers and pays N5,837,899,980.40 in monthly wages. Anambra, with 20,541 employees, pays N1,824,851,308.96 monthly, in addition to N894,480,399.62 for pensions and N579,694,680.33 for debt servicing. Bayelsa employs 48,213 workers, paying N5,802,435,178.58 in monthly wages, alongside N1,194,528,784.40 for pensions and N3,535,787,992.48 for debt servicing, totaling N10,532,751,955.46 in monthly recurrent expenditure.
Benue, with a workforce of 13,366, pays N2,040,184,471.85 in monthly wages, N76,838,634.62 for pensions, and N64,685,126,826.08 for debt servicing, totaling N66,802,149,932.56 monthly.
Delta employs 50,871 workers, paying N8,973,081,853.50 in wages, N1,499,886,303.39 for pensions, and N72,417,433,139.00 for debt servicing, totaling N82,890,401,295.89 monthly. Jigawa, with 44,831 employees, pays N2,795,662,113.02 in wages and N345,987,843.12 for pensions, totaling N3,141,649,956.14 monthly in recurrent expenditure.
Katsina, Kwara, and Niger have workforces of 19,062, 36,048, and 22,225, respectively, with monthly recurrent expenditures of N139,294,944,565.27, N4,457,268,675.54, and N2,653,614,213.35.
Abia’s total recurrent expenditure is N111,983,979,958.62, against a total revenue of N147,637,730,867.73. Adamawa has a recurrent expenditure of N70,369,399,885.57 against a total revenue of N109,722,949,684.65. Akwa Ibom has a high revenue of N444,288,683,000 with recurrent expenditure of N235,144,539,000.
Lagos had the highest total revenue in 2022, amounting to N1,243,778,878,170, with a recurrent expenditure of N621,043,036,000. Delta followed with N702,020,717,460.08 in revenue and N377,905,100,451.83 in recurrent expenditure.
Rivers amassed N525,588,159,714.88 in revenue with N186,974,715,774.87 in recurrent expenditure. Kaduna had total revenue of N222,349,875,000 and expenditure of N95,987,999,472.10; Ogun had N297,249,009,626.83 in revenue with recurrent expenditure of N178,519,010,628.42; and Oyo had total revenue of N247,156,776,739.70 with recurrent expenditure of N152,077,804,384.65.
Kebbi State had the lowest total revenue in 2022, with N92,132,444,588.16 and recurrent expenditure of N57,601,464,374.96, followed by Taraba with N101,177,283,069.87 in revenue and N75,055,201,412.62 in recurrent expenditure.
Aside from FAAC allocations, some states recorded poor internally generated revenue (IGR) in 2022. Zamfara generated N6,513,960,477.20, Kebbi N8,630,767,122.96, Taraba N9,744,331,840.01, and Yobe N9,940,554,642.00. Katsina (N12,821,119,042.64), Adamawa (N13,175,774,969.53), Niger (N14,427,373,136.00), Benue (N15,021,223,729.38), Plateau (N15,927,001,739.90), and Imo (N16,711,346,111.18) also showed poor revenue standings.
According to a report by PUNCH on October 19, 2023, 15 states have yet to implement the N30,000 minimum wage since it was signed into law in 2019.
BudgiT reported that while these states have not implemented the minimum wage, the cumulative personnel costs for all 36 states grew by 13.44% to N1.75 trillion in 2022 from N1.54 trillion in 2021.
BudgiT’s ‘The States of States Report 2023’ highlighted that the 36 states increased their revenue by 28.95% from N5.12 trillion in 2021 to N6.6 trillion in 2022.
The IGR of the 36 states grew by 12.98% from N1.61 trillion in 2021 to N1.82 trillion in 2022, indicating a strengthened domestic revenue mobilization capability.
However, the IGR to GDP ratio remained low at 1.01%. The increase in IGR was not uniform, with 17 states experiencing a decline from the previous year, while 19 states recorded positive growth.
Chris Onyeka, Assistant General Secretary of the NLC, criticized many state governors for flouting the Minimum Wage Act, listing Abia, Enugu, Bayelsa, Delta, Nasarawa, Gombe, Adamawa, Niger, Sokoto, Imo, Anambra, Taraba, Benue, and Zamfara as defaulting states. In response, Enugu State’s TUC chairman, Ben Asogwa, stated that the state began paying the N30,000 minimum wage and its consequential adjustment in February 2020 for state government workers, with local government workers and primary school teachers receiving a 25% consequential adjustment. Governor Peter Mbah later approved full implementation of the N30,000 minimum wage for both local government workers and primary school teachers.
Zamfara State Governor, Dauda Lawal, announced that the state would begin paying the N30,000 minimum wage starting June 2024.
