As the nation eagerly anticipates the new minimum wage President Bola Tinubu promised to present to the National Assembly, concerns arise that many states might face bankruptcy from implementing it.
In a recent Federal Executive Council meeting last Tuesday, a memorandum on the tripartite committee’s report regarding the new minimum wage was postponed. This decision allows for further consultations among federal and state governments, the private sector, and labour unions.
Last Thursday, Tinubu convened with the governors at the National Economic Council meeting chaired by Vice President Kashim Shettima. Although the meeting was expected to discuss the national minimum wage, it remained unclear if the issue was addressed.
Additionally, on the same Thursday, the Southern Governors’ Forum released a communiqué from their meeting in Abeokuta, Ogun State. The governors suggested that each state should negotiate its minimum wage with its workforce.
However, the Nigeria Governors’ Forum’s stance on their excessive influence in minimum wage negotiations has sparked reactions from the labour unions.
In a document, titled, “Analysis of State FAAC inflows and state expenditure profile,” issued by the Nigeria Governors’ Forum Secretariat, the NGF report cautioned that the implementation of the new minimum wage might force states into bankruptcy as it would significantly raise recurrent expenditure.
The report indicated that in 2022, Abia, Ekiti, Gombe, Imo, Katsina, Kogi, Oyo, Plateau, Sokoto, Yobe, and Zamfara were already in deficit due to the burden of recurrent expenditure.
The report projected that a 50 per cent increase in recurrent expenditure would push 13 states into deficit, while only 10 states would maintain financial stability.
Implementing the tripartite committee’s recommendation of a N62,000 minimum wage would require more than a 100 per cent increase from the current N30,000. This adjustment could potentially result in positive net revenues for only a handful of states, such as Anambra, Bayelsa, Borno, Ebonyi, Gombe, Imo, Jigawa, Kaduna, Lagos, and Rivers, based on fiscal data from 2022.
Net revenue, which represents the surplus or deficit, is calculated by subtracting recurrent expenditure from a state’s total revenue. A positive net revenue indicates a surplus, whereas a negative net revenue signifies a deficit.
Additionally, a state’s total revenue is derived from various sources, including monthly allocations from the Federal Account Allocation Committee, internally generated revenue, aids and grants, and constituency development funds.
