As the nation anticipates the new minimum wage proposal to be sent to the National Assembly by President Bola Tinubu, concerns have arisen about the financial burden it may impose on states. The Nigerian Governors’ Forum (NGF) warns that implementing the new minimum wage could push many states into bankruptcy due to increased recurrent expenditure.
At the recent Federal Executive Council meeting, a memorandum on the report of the tripartite committee on the new minimum wage was deferred to allow for more consultations among federal and state governments, the private sector, and labor unions. Subsequently, President Tinubu met with governors at the National Economic Council meeting chaired by Vice President Kashim Shettima. Although the national minimum wage was a key topic, no concrete decision was disclosed.
The Southern Governors’ Forum, in a communiqué from their meeting in Abeokuta, Ogun State, called for each state to negotiate its minimum wage with its workforce. Labor unions have reacted strongly to the governors’ influence over the minimum wage negotiations.
A document titled “Analysis of State FAAC inflows and state expenditure profile,” from the NGF Secretariat, indicated that the new minimum wage could bankrupt several states. The report highlighted that states like Abia, Ekiti, Gombe, Imo, Katsina, Kogi, Oyo, Plateau, Sokoto, Yobe, and Zamfara were already in deficit in 2022. If recurrent expenditure increased by 50%, an additional 13 states would fall into deficit, leaving only 10 states financially stable.
The tripartite committee’s recommendation of a ₦62,000 minimum wage, more than double the current ₦30,000, could leave 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, defined as the total revenue minus recurrent expenditure, showed several states in deficit. For instance, Abia, with about 58,631 workers, had a total recurrent expenditure of ₦111.98 billion against a total revenue of ₦147.64 billion. Lagos, with the highest total revenue of ₦1.24 trillion, had a recurrent expenditure of ₦621.04 billion.
Poor internally generated revenue (IGR) was also a concern for several states, with Zamfara, Kebbi, Taraba, and Yobe generating significantly less than needed to cover expenses.
The PUNCH reported that 15 states have yet to implement the ₦30,000 minimum wage since it was signed into law in 2019. Despite growing their cumulative personnel costs by 13.44% to ₦1.75 trillion in 2022 from ₦1.54 trillion in 2021, many states still struggle to meet wage obligations.
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 non-compliant.
However, some states have made progress. Enugu State, for instance, commenced payment of the ₦30,000 minimum wage and its consequential adjustment in February 2020, with full implementation approved by Governor Peter Mbah for local government workers and primary school teachers. Zamfara State Governor Dauda Lawal also announced that the state would begin payment of the ₦30,000 minimum wage effective June 2024.
