Report Highlights States Struggling to Pay New Minimum Wage
Analysts at Data Services and Resources (ADSR) have identified several Nigerian states that may struggle to finance a new minimum wage, including Benue, Osun, Oyo, Kogi, and Kano. The report also lists Yobe, Adamawa, Jigawa, Kebbi, Plateau, Nasarawa, and Ekiti as states likely to find wage reviews challenging. Conversely, Lagos, Imo, and Zamfara are ranked highest in their ability to pay.
Key Findings
ADSR’s report, titled “The Nigerian New Minimum Wage: Implications for State Governments’ Budget Performance,” uses four metrics to rank states:
- Ratio of Personnel Expenditure to Total Expenditure
- Total Revenue
- Internal Revenue
- Total Debt Stock
States with high ability to pay have low personnel expenses relative to total expenditure and revenue, low debt profiles, and high elasticity of personnel costs relative to future revenue and expenditure.
Impact of a New Minimum Wage
ADSR economists state that increasing the minimum wage would positively impact states’ internal revenue through higher personal income tax. However, it would also raise states’ total expenditure, primarily through increased personnel costs, allowances, benefits, and overheads. States will need to invest in capital projects to align with workers’ new pay and justify higher taxes.
Current Challenges
Despite calls for a new minimum wage, a 2023 report by BudgIT revealed that 15 states have yet to implement the N30,000 minimum wage signed into law in 2019. This challenges the affordability of another upward review, especially with organized labor demanding a N250,000 new minimum wage.
Financing a New Minimum Wage
ADSR suggests six ways for states to finance a new minimum wage:
- Raising the Tax Base: Investing in an efficient tax collection system.
- Borrowing: For states with low indebtedness records, though this is unsustainable long-term.
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