Soludo was speaking the minds of the 36 states governors who had earlier under the aegis of the Nigerian Governors Forum said they would be unable to pay N60,000 as minimum wage in view of the current economic realities.
Records show that states like Abia, Bayelsa, Delta, Enugu, Nasarawa, Adamawa, Gombe, Niger, Borno, Sokoto, Anambra, Imo, Benue, Taraba and Zamfara have yet to implement the minimum wage of N30,000 approved since 2019.
A recent report indicates that the internally generated revenues (IGR) of 15 states were far below 10 per cent of their Federation Account Allocations in one year. Meaning that without federal allocation, they would be unable to meet their obligations in the states.
Outside Lagos, Rivers, Delta, and Ogun States which have relatively impressive IGR, the remaining 32 states rely more on the allocations from Federation Account to fund their services. States like Yobe, Zamfara, Ekiti, Borno, Kebbi, Taraba, Nasarawa, Adamawa, Gombe, Jigawa, Bauchi and Katsina generate little to nothing in internal revenue.
The National Bureau of Statistics ( NBS) reports that the 36 states in Nigeria, including the Federal Capital Territory generated a total of N1.93 trillion as IGR in 2022. During the same period, BudgIT’s 2023 State of States Report, shows that despite the fact that 15 states have yet to implement the minimum wage of N30,000, the cumulative personnel cost of the 36 states in 2022 grew by 13.44 per cent to N1.75 trillion from N1.54 trillion in 2021.
A cursory look at the first quarter 2024 IGR of the 36 states of the federation vis-a-vis their wage bill for the same period show that 21 out of the 36 states generated far below their personnel cost for the period.
The analysis showed that in the first quarter, Kano State made N9.5 billion but incurred a personnel cost of N20.4billion.
This means that with its internally generated revenue only, it would have been unable to meet its wage bill. Kaduna State generated N13 billion in the first three months of 2024, but incurred salaries to the tune of N15 billion, meaning that its internally generated revenue was N2 billion short of the three months wage bill.
The situation is not different in Oyo State with an internally generated revenue of N13.1 billion and personnel cost of N21.1billion.
Osun generated N11.1 billion internally but had a personnel cost of N12.5 billion. In Kogi, internally generated revenue stood at N6.2 billion while personnel cost was put at N14 billion.
Other states like Nasarawa made N3.6 billion but had a wage bill of N9 billion. Bauchi would not have paid its salaries up to the recorded N9.8 billion, if it relied on internally generated revenue of N7.9 billion for the first quarter of the year.
In Adamawa, the internally generated revenue stood at N3.3 billion while the personnel cost was N10.5 billion. In Enugu the personnel cost posted was N4.9 billion while the internally generated revenue stood at N2.2 billion.
The situation is not better in Zamfara where the sum of N2.1 billion was generated and N8.1 billion salaries were to be paid.
For Borno, internally generated revenue stood at N15.6 billion while personnel recorded was N8.4 billion.
In Ondo state while only N7.8 billion was raked in as internally generated revenue, the personnel cost stood at N15.1 billion, almost twice the internally generating revenue recorded.
In Kebbi, the story is not different as the state recorded the sum of N2.1 billion as internally generated revenue but spent over two times on personnel cost. Personnel cost stood at N5.2 billion .
Plateau state also incurred personnel expenditure of N8.6 billion while it made N5.1 billion internally.
Jigawa state had a total of N1.3 billion as internally generated revenue but spent N12.4 billion as personnel expenditure in the first quarter of 2024.
While Sokoto posted N4.4 billion as revenue, it spent N12.8 billion on personnel costs.
Gombe also had an IGR lower than the personnel expenditure. In the first three months of 2024, the sum of N4.5 billion was made by the state but personnel cost stood at N10 billion.
Taraba State made only N1.9 billion but had a wage bill of N8.7 billion in the first three months of 2024.
Abia state made N6.3 billion as IGR with a wage bill of N6.8 billion for the first three months of 2024.
In Ebonyi, the wage bill totalled N3.9 billion, although the state made only N2.9 billion internally.
In Yobe state, the internally generated revenue stood at N2.1 billion while the state incurred a wage bill of N11 billion.
It is clear that most of these states have heavy overhead and they have very bloated bureaucracy, political appointees which is putting a lot of pressure on their resources. Experts have warned that many of the states don’t need more than 50 per cent of their workforce but for political reasons, they put all manner of characters on their payroll.
It is also instructive to note that at least 31 state governments in Nigeria have collectively borrowed N457.17 billion to pay salaries to their respective state civil services. This significant financial move was facilitated through the Salary Bailout Facility (SBF), a strategic intervention by the Central Bank of Nigeria (CBN) aimed at alleviating the fiscal pressures faced by these states.
Established in August 2015, the SBF was designed to help state governments clear the backlog of outstanding salaries owed to their employees.
A recent report by the CBN on the implementation of the SBF indicates that despite the substantial disbursement, the principal repayments made so far total N117.21 billion, with interest repayments at N45.21 billion, this leaves a considerable sum of N339.97 billion outstanding, which is about 74 per cent of the total amount disbursed. The report also informed that there is also an overdue amount of N1.31 billion as of September 2023.
While experts believe that states can do better to shore up their internally generated revenue by becoming more creative, they also argue that even what is generated is wasted on frivolous spending that has no bearing on the social well being of the citizens.
They call on the state governments to be innovative in revenue generation, and also want them to cut down the cost of running their governments because if they continue borrowing to pay salaries, it is not good for the economy.
There is fear and rightly so, that the ongoing Tripartite Committee on National Minimum Wage may well be a waste of resources as state governors and even the organised private sector may not pay the agreed sum. This could lead to another round of industrial disharmony leading to another nationwide strike in sympathy with the state workers whose governors refuse to pay. As of today, there is no punishment meted out to the 15 states that have not implemented the N30,000 minimum wage.
A fiscal governance expert, and Lead Director, Center for Social Justice (CSJ) Bar. Eze Onyekpere in his reaction to the position of state governors that they would be unable to pay the new minimum wage, said it is obvious that the political elite are by their actions calling for a revolt of the masses against subjugation and slavery like conditions of work.
He noted that the same political class that draws uniform salaries across the federation without any consideration of the financial capacity of their states are pleading for different negotiations. “This is unacceptable,” he said. “Workers should rebel against tyranny since the thieving leaders have decided to operate outside of the rule of law. The constitution is clear on a uniform minimum wage.”
Although there is a school of thought that believes that in view of the fact that states have different financial capabilities, each state should be allowed to negotiate with its workers what its minimum wage should be, that also presents its own challenges. According to expert opinion, it could lead to a race to the bottom for wages, hurting workers in poorer states and creating complexity for businesses operating across state lines.
Professor Godwin Oyedokun, a professor of economics at the Lead City University Ibadan, agrees that there are challenges with enforcing a national minimum wage in Nigeria because according to him, there’s no clear penalty for states not paying the agreed minimum wage.
He said that states have varying financial capabilities, making it difficult for a single minimum wage to fit all. “A possible way out would be to allow states to negotiate based on their economic realities,” he said, adding that there could be different minimum wages based on factors like cost of living in each state.
He said what the government needs to do is to ensure that all workers benefit from a minimum standard of living, which of course he said requires a robust enforcement system, which can be challenging to implement.
As a way out, he suggests the federal government should tie federal funding to states adhering to the minimum wage,and strengthening Labor Laws by implementing clear penalties for non-compliance with the minimum wage.
While advocating for stronger worker unions to negotiate better wages at the state and local levels, Prof. Oyedokun said the ideal solution likely involves striking a balance between a national standard and recognition of state-specific challenges.
He however noted that the ongoing negotiations may result in a compromise minimum wage that most states can manage.