New Minimum Wage Could Bankrupt States, Warns Nigeria Governors Forum

The Nigeria Governors Forum (NGF) has warned that the implementation of a new minimum wage could push many states into bankruptcy. This warning comes as President Bola Tinubu prepares to submit the new minimum wage proposal to the National Assembly.

At a recent Federal Executive Council meeting, a memorandum on the new minimum wage was delayed for further consultations among federal and state governments, the private sector, and labor unions. Despite an expectation that the National Economic Council meeting chaired by Vice President Kashim Shettima would address the issue, no such discussion was reported.

Last Thursday, the Southern Governors’ Forum also called for states to individually negotiate minimum wages with their workforces. This stance has been met with resistance from labor unions, who criticize the governors for their influence over wage negotiations.

A report from the NGF Secretariat, titled “Analysis of State FAAC Inflows and State Expenditure Profile,” predicts financial instability for states if the new minimum wage is enforced. The report notes that states such as Abia, Ekiti, Gombe, Imo, Katsina, Kogi, Oyo, Plateau, Sokoto, Yobe, and Zamfara already faced deficits in 2022 due to high recurrent expenditures.

The proposed N62,000 minimum wage, more than double the current N30,000, could further strain state finances. Only a few states, including Anambra, Bayelsa, Borno, Ebonyi, Gombe, Imo, Jigawa, Kaduna, Lagos, and Rivers, might maintain a positive net revenue based on 2022 fiscal data.

State finances are derived from Federal Account Allocation Committee (FAAC) allocations, internally generated revenue (IGR), aids, grants, and constituency development funds. However, several states already struggle with high expenditure. For instance, Abia pays nearly N5.84 billion monthly in wages, Anambra spends N1.82 billion, and Bayelsa’s monthly recurrent expenditure totals over N10.53 billion.

Notably, Lagos had the highest revenue in 2022, with N1.24 trillion and a recurrent expenditure of N621 billion. In contrast, Kebbi State had the lowest revenue at N92 billion, with N57.6 billion spent on recurrent costs.

Despite some states seeing growth in IGR, many still have low revenue standings. For example, Zamfara generated only N6.51 billion, while Kebbi and Taraba generated N8.63 billion and N9.74 billion, respectively.

SK Blog previously reported that 15 states have yet to implement the N30,000 minimum wage signed into law in 2019. Civil society organization BudgiT noted that while the cumulative personnel cost for all states grew by 13.44% to N1.75 trillion in 2022, the increase in IGR did not reflect uniformly, with 17 states experiencing a decline.

Labor unions continue to criticize state governments for not complying with the Minimum Wage Act. Chris Onyeka of the NLC highlighted several states, including Abia, Enugu, Bayelsa, Delta, and others, as defaulters.

In response, Enugu State’s TUC chairman Ben Asogwa stated that the state began paying the N30,000 minimum wage in February 2020, with Governor Peter Mbah later approving full implementation for local government workers and primary school teachers.

Zamfara State Governor Dauda Lawal also announced that his state would begin paying the N30,000 minimum wage starting June 2024.