The analysis of the approved budgets for the 2024 fiscal year, has shown that at least 24 states in Nigeria will be unable to pay their workers’ salaries without relying on federal allocations from the central government.
Only 11 out of the 36 state governments have robust internal revenue that allows them to independently cover salary payments. The analysis, based on data from the Open States platform, shows that the affected states will need to rely on federal allocations or borrow from banks to meet their salary obligations.
The states with self-sustaining revenue sources are Lagos, Kano, Anambra, Edo, Enugu, Imo, Kaduna, Kwara, Osun, Ogun, and Zamfara. However, the remaining 24 states, including Bayelsa, Ondo, Sokoto, Plateau, Oyo, and Delta, among others, have wage bills that surpass their internally generated revenues (IGR), raising concerns about worker productivity and the efficiency of state governments in revenue generation.
The inability of these states to independently pay salaries is occurring amidst calls from labor unions for wage increases due to the rising cost of living following the removal of fuel subsidies and the unification of the foreign exchange markets by the current administration. The Nigerian Labour Congress has expressed the possibility of demanding a new minimum wage of N1 million for Nigerian workers if inflation continues to rise, although the government has rejected this demand.
In the first half of 2023, state governments borrowed about N46.17 billion from three banks to meet salary obligations. Despite increased federal allocations resulting from petrol subsidy removal and currency reforms, experts believe that the projected revenue increase should have reduced the states’ reliance on borrowing.
Financial experts have raised concerns about states’ heavy spending on recurrent expenditure and emphasized the need for financial innovation. They suggest that states should identify their areas of strength to attract investors and develop policies and economic summits to showcase and attract investments. Increasing service delivery and revenue generation are also recommended to reduce dependence on federal allocations.
Furthermore, the analysis reveals that 32 states have indicated plans to borrow N2.78 trillion from domestic and external institutions to fund their 2024 budgets. To ensure financial sustainability, experts urge states to be more creative in revenue generation, attract investments, address the issue of fiscal federalism, rationalize their workforce, and reduce bloated bureaucracies and political appointees.