As Nigeria anticipates the new minimum wage proposal from President Bola Tinubu, concerns rise that its implementation may push many states towards bankruptcy.
The Federal Executive Council delayed a decision on the new minimum wage to allow further consultations among federal and state governments, the private sector, and labor unions.
President Tinubu recently met with governors at the National Economic Council, but the meeting did not address the minimum wage issue.
Meanwhile, the Southern Governors’ Forum suggested that each state negotiate its own minimum wage with its workforce.
Labor unions criticized the Nigeria Governors’ Forum (NGF) for their dominant role in wage negotiations. An NGF report highlighted that implementing a new minimum wage could bankrupt states due to increased recurrent expenditures.
The report revealed that several states were already in deficit in 2022 and predicted that a 50% rise in recurrent expenditure would push 13 states into deficit.
The tripartite committee recommended a minimum wage of N62,000, a significant increase from the current N30,000. Only a few states, such as Anambra, Bayelsa, and Lagos, might maintain positive net revenues with this increase.
The NGF report also detailed the financial status of various states, highlighting high recurrent expenditures and low internally generated revenues (IGR) in many states. For instance, Lagos had the highest total revenue in 2022, while Kebbi had the lowest. Some states, like Zamfara and Taraba, recorded particularly poor IGR.
Reports indicate that 15 states have not implemented the current N30,000 minimum wage, despite its legal status since 2019.
However, all 36 states significantly increased their personnel costs and overall revenue from 2021 to 2022, according to BudgiT’s ‘The States of States Report 2023’.