Minimum Wage: The Reasons Behind Governors’ Reluctance to Pay

As the nation awaits President Bola Tinubu’s executive bill on the new minimum wage to the National Assembly, many states might need a bailout or consider layoffs to afford the proposed ₦62,000 wage by the Federal Government and the Organised Private Sector (OPS).

Despite increased allocations following the removal of the fuel subsidy in May 2023, sources reveal that the increments are insufficient to sustain the proposed ₦62,000 minimum wage. The OPS clarified that no formal agreement was reached in the recent Tripartite Committee meeting, only an alignment of interests.

Diverging State Responses

Governor Nasir Idris of Kebbi State has distanced himself from governors expressing inability to pay the ₦62,000 wage, committing to the agreed amount. Conversely, Senator Ahmed Wadada of Nasarawa West has called for a minimum wage of at least ₦150,000, urging President Tinubu to consider the current economic realities.

Financial Constraints

Currently, at least 20 states are not providing any wage awards to mitigate the hardship caused by fuel subsidy removal, despite President Tinubu’s appeal for states to follow the federal government’s example of paying ₦35,000 in addition to the ₦30,000 minimum wage.

Allocation Increases and Reductions

Data indicates that from January to June 2023, the 36 states received ₦2.188 trillion, while from July to December 2023, they received ₦2.305 trillion—a meager ₦116.79 trillion (5%) increase. Some states, like Lagos, saw significant allocation increases (28%), whereas others, such as Akwa Ibom (33%) and Delta (26%), received less.

Affordability and Economic Impact

A governor argued that the issue is broader than federal government negotiations; a national minimum wage impacts states, local governments, and private sector employers, especially SMEs. Many states might have to use all their federal allocations and internal revenues, and possibly borrow, to pay their workers, potentially neglecting other essential services.

OPS Position

The OPS emphasized that the new minimum wage should apply only to employers with 200 employees and above, to protect SMEs, which are the largest employers and crucial to the economy. They argue that forcing SMEs to pay ₦62,000 could harm the economy, highlighting the difference between a minimum wage and a living wage.

Legislative and Public Responses

Senator Ahmed Wadada advocates for a ₦150,000 minimum wage, suggesting that lawmakers are willing to reduce their own remunerations to ensure workers receive decent salaries. He remains confident that President Tinubu’s administration will propose an acceptable figure.

In summary, while the proposed minimum wage aims to alleviate worker hardship, its feasibility for many states remains a significant challenge, necessitating further negotiations and potentially new legislative actions.

This article is sourced from The Vanguard newspaper, with minor edits and adaptations by The Spectacles for clarity and readability.