New minimum wage may push states into bankruptcy — NGF report

The Federal Executive Council during a recent meeting, released a memorandum on the findings of the tripartite committee regarding the new minimum wage to facilitate further discussions among various stakeholders, including federal and state governments, private sector representatives, and labor unions.

In a meeting chaired by Vice President Kashim Shettima and attended by Governor Bola Tinubu, concerns about the national minimum wage were expected to be discussed.

However, there was no clarity on whether the issue was addressed during the meeting.

Additionally, the Southern Governors’ Forum issued a statement following a meeting in Abeokuta, advocating for each state to individually negotiate the minimum wage with its employees.

The labor unions however have expressed disapproval of the Nigeria Governors’ Forum’s perceived dominance in the minimum wage negotiations.

A report from the Nigeria Governors’ Forum Secretariat highlighted the potential risks of states facing bankruptcy if the new minimum wage is implemented, citing increased recurrent expenditures.

Several states were already in deficit in 2022, with further projections signaling financial instability for more states if recurrent expenditures surge.

The proposed minimum wage recommended by the tripartite committee, set at N62,000, would require a significant rise from the current N30,000 level, potentially resulting in only a handful of states remaining financially sound, based on fiscal data from 2022.

The financial analysis of state governments’ expenditures revealed varying employment sizes and obligations, indicating the complexity and challenges ahead of implementing the new minimum wage policy.

Several states, including Lagos, Delta, and Rivers, showcased different revenue and expenditure profiles, with some states struggling to generate sufficient internal revenue to meet their financial obligations. The implications of the minimum wage increase on each state’s financial health were clearly outlined in the report.

According to the documents, Abia, with an employment size of about 58,631 workers, pays N5,837,899,980.40 as wage monthly. Anambra has a 20,541 employment size and pays N1,824,851,308.96 monthly as wages, apart from N894,480,399.62 as pension obligation and N579,694,680.33 for debt servicing.

Bayelsa boasts of 48,213 workforce, paying N5,802,435,178.58 monthly, with N1,194,528,784.40 as pension obligation and N3,535,787,992.48 as debt servicing, totalling N10,532,751,955.46 as total recurrent expenditure monthly.

Benue has about 13,366 workers in its workforce and pays N2,040,184,471.85 as monthly wage, N76,838,634.62 for pension, and N64,685,126,826.08 for debt servicing, totalling N66,802,149,932.56 monthly.

Delta has about 50,871 workers, offering N8,973,081,853.50 as wages, N1,499,886,303.39 as pension, and N72,417,433,139.00 as debt servicing, accumulating to N82,890,401,295.89 in a month.

Jigawa has about 44,831 workers in its employ and pays N2,795,662,113.02 as wages, and N345,987,843.12 as a pension, totalling N3,141,649,956.14 monthly on recurrent expenditure.

Katsina, Kwara and Niger have 19,062, 36,048 and 22,225 workers, with accumulated N139,294,944,565.27, N4,457,268,675.54 and N2,653,614,213.35 monthly recurrent expenditure respectively.

For Adamawa, the recurrent expenditure stands at N70,369,399,885.57, against a total revenue of N109,722,949,684.65, while Akwa Ibom boasts of a high revenue of N444,288,683,000, with recurrent expenditure of N235,144,539,000.

Of the states, Lagos has the highest total revenue, amassing N1,243,778,878,170 in 2022, with a recurrent expenditure of N621,043,036,000, followed by Delta, with N702,020,717,460.08 and a recurrent expenditure of N377,905,100,451.83.

Rivers amassed N525,588,159,714.88 in 2022, with recurrent expenditure of N186,974,715,774.87; Kaduna had a total revenue of N222,349,875,000 and expenditure of N95,987,999,472.10; Ogun, N297,249,009,626.83, recurrent expenditure of N178,519,010,628.42 and Oyo, with total revenue of N247,156,776,739.70 and recurrent expenditure of N152,077,804,384.65.

Kebbi State had the lowest total revenue in 2022, raking in N92,132,444,588.16 and spent N57,601,464,374.96 on recurrent expenditure, followed by Taraba, with a total revenue of N101,177,283,069.87 and recurrent expenditure of N75,055,201,412.62.

Aside from FAAC allocation, some states recorded poor IGR in the 2022 data compiled by the NGF Secretariat.

Zamfara State generated N6,513,960,477.20; followed by Kebbi, with N8,630,767,122.96; Taraba, N9,744,331,840.01 and Yobe State, with N9,940,554,642.00.

The IGR of 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 a poor revenue standing.

Despite the national directive to implement the N30,000 minimum wage signed into law in 2019, some states, as reported in October 2023, were yet to enforce the wage increase for their workers.

This discrepancy raised concerns about compliance with labor laws and highlighted disparities in financial management across the states.

Efforts by civil society organizations like BudgiT aimed to shed light on the financial health and revenue growth of the states, providing valuable insights into the fiscal capabilities and challenges faced by state governments.

Labor unions and officials from various states voiced varying approaches and progress in implementing the minimum wage, underscoring the complexities and disparities in wage policies and compliance across the country.