Benue, Osun, Oyo, Others Will Struggle to Pay New Minimum Wage – Report
Analysts at Data Services and Resources (ADSR), a research firm, have identified Benue, Osun, and Oyo as states with the least ability to finance a new minimum wage. Other states likely to face challenges include Yobe, Kogi, Adamawa, Jigawa, Kebbi, Plateau, Kano, Nasarawa, and Ekiti. In contrast, Lagos, Imo, and Zamfara ranked highest in their ability to pay.
ADSR’s report, titled “The Nigerian New Minimum Wage: Implications for State Governments’ Budget Performance,” used four metrics: the ratio of personnel expenditure to total expenditure, total revenue, internal revenue, and states’ total debt stock.
States with a higher ability to pay had low personnel expenses relative to total expenditure and revenue, a low debt profile, and a high elasticity of personnel costs to future revenue and expenditure.
A new minimum wage is deemed necessary due to increased pressure on workers’ disposable income following various government reforms. ADSR economists argue that higher wages would boost internal revenue through higher personal income tax, though it would also increase total expenditure due to higher personnel costs, allowances, and overheads.
To align with the new pay and justify the need for higher taxes, the government will need to invest in capital projects.
Despite ongoing calls for a new minimum wage, a 2023 BudgIT report revealed that 15 states have yet to implement the N30,000 minimum wage signed into law in 2019. This highlights the difficulty states may face with a new wage increase, especially given the organized labour’s push for a N250,000 minimum wage.
ADSR suggested several ways to finance a new minimum wage, including raising the tax base, investing in efficient tax collection systems, reducing ‘ghost’ and redundant staff, commercializing state projects, and minimizing corruption.
Negotiations between the government and organized labour have been ongoing, with the proposed new minimum wage decreasing from N615,000 to N250,000 as of June 7, 2024. A tripartite committee recommended N62,000 to the federal government, while the National Assembly indicated willingness to approve N70,000.
The Nigerian Governors Forum (NGF) has pledged to remain dedicated to the process, while organized labour criticized the governors’ desire to determine state-specific minimum wages as divisive and undermining the national minimum wage mode.
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