As President Bola Tinubu prepares to propose a new minimum wage to the National Assembly, a report from the Nigeria Governors’ Forum (NGF) warns that many states might face bankruptcy if the new wage is implemented.
The Federal Executive Council recently postponed a decision on the new wage to allow for more discussions among federal and state governments, the private sector, and labor unions. Despite a recent meeting between Tinubu and state governors, no conclusion was reached on the minimum wage issue.
The NGF’s report, titled “Analysis of State FAAC Inflows and State Expenditure Profile,” highlights that an increased minimum wage could push states into financial instability. It points out that states such as Abia, Ekiti, Gombe, and Imo already faced deficits in 2022 due to high recurrent expenditures. The proposed N62,000 minimum wage, over double the current N30,000, could exacerbate these financial pressures.
Labor unions have criticized the governors’ influence over wage negotiations, advocating for a fairer process. The report predicts that with a 50% rise in recurrent expenditure, 13 states would fall into deficit, leaving only a few financially stable.
The financial viability of states is crucial, given their reliance on various revenue sources, including federal allocations, internally generated revenue, and development funds. The NGF’s analysis calls for careful consideration to avoid pushing states further into economic hardship.
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