Fiscal crisis ahead in states over N30,000

The jury is fully out on Nigeria sub-nationals, the ever queuing lot from 36 states and the Federal Capital Territory who gather every month in Abuja to share from a federation account most contribute very little to. At N18,000 minimum wage, nearly all the states ground to a halt, Even now, analysts familiar with goings in the states say many are of the sub-nationals are pretending to be able on the alter of political expediency.

It is election season and many state administrations would pretend to have no qualms with the N30,000 new minimum wage already agreed to by a tripartite committee whose recommendation is now on the table of President Muhammadu Buhari to sign off before it goes to the National Assembly for a legislation to back it up.

But many look ahead and speaking of an impending fiscal crisis ahead, the likes of which had never been seen before. “There would always be a crisis before Nigerian governments do not like to tell themselves the truth, and they do not approach matters such as this from where it should ordinarily start,” said a financial analyst vast in wage negotiations.

There are talks also about the level of transparency, including government’s failure to carry Nigerians along by providing full disclosure on how it intends to finance  a new wage that is about 67 percent high than an amount that many of the federating units had struggled extremely hard to honour without any breaking sweat.

Labour’s demand of N30,000 as the new minimum wage for workers in the country is therefore likely to trigger a fiscal crisis in many states of the federation if the President eventually gives his assent to the recommendation of a tripartite committee currently on his table.

The Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC) are in the vanguard of the agitation for a new national minimum wage said to be long overdue after the last review exercise that was carried out over seven years ago.

Both the NLC and the TUC had in 2016 demanded an upward review of the minimum wage from N18,000 to N56,000, a request that was not accorded priority by the government at the time. The renewed agitation, however, gained fervour and momentum early this year when labour presented a new minimum wage request of N56,000.

The lack of progress in the consideration of the demand and labour’s threat of nationwide industrial actions prompted President Buhari to set up a 30-member Tripartite Committee on the matter in November 2017.

The committee submitted a negotiated new minimum wage of N30,000 to the President last week.

Economists who spoke to business a.m. on the matter said a lot of questions would need to be asked to ascertain the framework of the new minimum wage. Doyin Salamin, a renowned economist at the Pan Atlantic University, Lagos, said more insights needed to be provided on the mechanisms for implementing the recommendations of the committee.

Last week, some state governors lamented the extra burden the implementation of the new minimum wage would cause on their already strained finances. Nasir el-Rufai of Kaduna State, at a meeting of the Nigerian Governors Forum, faulted the idea of a uniform or national minimum wage that was being determined by the federal government, saying each state should be allowed to determine its minimum wage according to the level of its income.

The 36 state governors, under the aegis of NGF, had proposed N22,500 as the new national minimum wage.

But el-Rufai canvassed a review of the laws to allow states to determine what each should pay.

In a similar vein, Abdulfatah Ahmed of Kwara State said it was clear that the new minimum wage was coming with an added responsibility and the current revenue profile was not likely to take it on.

Ahmed added that it was incumbent on all stakeholders in the governance of states to strike the necessary balance between economic and social costs of generating increased internal revenue. 

Meanwhile, most states in the federation are reeling under both salary as well as pension and gratuity overhang spanning many months and years respectively.

For instance, Mr Rochas Okrocha’s Imo State has neither paid gratuity nor pension in  the last seven years, while core civil servants have not been paid pension in 14 months. Some categories of workers are being owed up to 10 months salary arrears.

Neighbouring Abia is reported to have an estimated N25 buillion in srrears of pension and gratuity, while Bauch State unmet salary, pension and gratuity obligations stand at N20 billion aside owing leave grants to its workers for two years.

Ebonyi State is alleged to have been paying half salary to its workers and between 39 and 40 percent of gratuity and pension calculated on the basis of the half salary.

The case of Ekiti is a pathetic one as workers are being owed cummulative salary, pension and gratuity totalling N32 billion. Kwara is said not to have paid local government gratuity since 2009, while Kano State secondary school teachers  are owed eight months salaries with gratuity also owed since 2015.

With this scary picture in the states, there are fears that the travails of the states may worsen when they take on added fiscal responsbilities in form of higher wage bill and may be heavily challenged to pursue development of any kind.

Analysts express doubt over the sustainability of the payment of the proposed national minimum wage as the revenue base of the states is limited, with allocations from the centre being the main source.

In the face of mounting cost and expenditure not matched by revenue, the analysts say the right thing to do is to cut cost and increase revenue.

This may entail right sizing of the civil service and introducing new taxes to meet government’s revenue target. However, fear of a possible backlash from the people at the polls is said to be the main reason the governors are reluctant to do what they need to do, which may not be politically correct.