October 3, 2023

While states believe they should be able to set their own salaries, the Federal Government insists on a uniform national minimum wage. As workers clamour for salary reviews, the differences may cause friction between the two tiers of government. OKECHUKWU NNODIM writes on the position of experts on the issue

The current rising inflation and depreciation of the local currency, which has eaten deep into the purchasing power of Nigerians, have made workers clamour for an upward review of salaries. This is despite the fact that many states of the federation have yet to implement the last minimum wage signed into law in 2019. Six states have yet to pay the current N30,000 minimum wage.

It is in light of this that some economists have argued that state governments should have the autonomy to decide the salaries and allowances of their workers based on the revenue accruable to them.

Although this is contrary to the current practice where the Federal Government fixes the salaries and allowances of public officials to reflect uniformity across the country, the experts insist that giving states the leeway to determine the salaries and allowances of their workers would encourage growth in the states.

Some of the experts who spoke to our correspondent claimed that the decentralisation of remuneration in the country would not only enable the states to adequately manage their finances but also ensure that they meet their obligations and avoid owing salaries.

They observed that though the minimum wage of N30,000 as approved by the Federal Government was done in good faith, the amount could be too low to pay the workers of some states when matched against their revenues.

They, however, noted that on the other hand, the amount could be too high for many other states.

“The capacity of a state like Lagos, for instance, cannot be compared to that of a state like Ekiti, Ondo or others that do not have much, in terms of revenue, whether Internally Generated Revenue or even federal allocation,” the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, stated.

He told our correspondent that states were supposed to pay salaries according to their capacities.

“You cannot compare, for instance, Delta and Rivers that have revenues, derivations and all sorts of things that they enjoy in terms of revenue allocation, with some other states. So, if you are not equal, then your remuneration cannot be equal.

“This is because the states have varied capacities and their ability to pay varies. So, it is only fair that they pay according to their capacities. Between them and labour, there can be a negotiation of what they can afford to pay,” he further argued.

With this, according to Yusuf, who was the immediate past Director-General, the Lagos Chamber of Commerce and Industry, the problem of non-payment of salaries, among others, would be a thing of the past.

Recently, the Governor of Ondo State and Chairman of Southern Nigeria Governors’ Forum, Oluwarotimi Akeredolu, kicked against the practice of the Federal Government fixing salaries and allowances of public officials to reflect uniformity nationwide.

He argued that this was unacceptable in a federal system of government, adding that the practice of gathering revenues from states into one purse and sharing it monthly among the three tiers of government was outdated.

The governor, who spoke at the Zonal Public Hearing on the Review of the 2008 Remuneration Package for Political, Public and Judicial Office Holders in Nigeria by the Revenue Mobilisation Allocation and Fiscal Commission in Akure, the Ondo State capital, noted that it was not sufficient for the RMAFC to regulate the salaries of public officials, but should try to reduce the high influence of the Federal Government on the federating units of Nigeria to encourage development.

Akeredolu, who was represented at the event by his deputy, Lucky Aiyedatiwa, declared, “Let every state determine the salaries and allowances of its officials. Let the states control their resources and pay tax to the centre.”

While speaking on the mopping up of revenue from states by the Federal Government, and sharing it monthly with the three tiers of government, Yusuf stated that many experts had faulted this practice.

 “This is what devolution of power and fiscal federalism should address. It is not fair that you come to a state that has a lot of activities and the revenue coming from those activities is going to the centre, while there is no strong derivation component in the way you are sharing the revenue.

“It is not equitable. Take a state like Lagos, for instance, you have the ports and other multinationals, and all of their activities are putting so much pressure on the infrastructure in Lagos.

“But import duty, company tax, education tax, etc., are going to the central pool for everybody to share. Meanwhile, all the trucks and trailers are in Lagos killing people, spoiling the roads and causing one form of havoc or the other,” he stated.

Yusuf further pointed out that all the employees working in most of these institutions and organisations were being supported with facilities provided by the state government.

“So, where is the equity? Even with some of these alcoholic drinks, people say the drinks should not be consumed in their states. Meanwhile, they are sharing the revenue generated from the sale of alcohol. So, we have to work out things that are equitable,” the CPPE boss stated.

He noted that fairness to states and the Federal Government must be worked out within the context of fiscal federalism, “so that from whatever revenue you generate from a particular state, especially from activities that generate what we call negative externalities for that state, there has to be a strong derivation component.”

 Yusuf, however, noted that the only areas with strong derivation components currently in Nigeria were the oil-producing areas, stressing that other sources of revenue seem to have been neglected in terms of derivation.

“Some states are suffering as a result of the revenue-generating activities for the Federal Government that are going on in these states. Any special compensation to these states? No!” he remarked.

He said these were some of the concerns raised by the Ondo State governor, adding that “I agree perfectly with him.”

On his part, a former President of the Association of National Accountants of Nigeria, Dr Sam Nzekwe, explained that though the salaries of federal and state workers were not the same, the benchmark was that of workers in the federal civil service.

He, however, stated that it was vital for states to decide on what they could pay, rather than making them pay a prescribed benchmark that could be higher or lower than their various capacities.

“I know that the salaries and allowances of federal workers are not the same as that of employees of state governments, but the benchmark is what is being paid to Federal Government workers.

“So, I quite agree with those who share the view that states should be allowed to decide on what they could pay, based on what they generate as revenue.

“The state salary may not be the same as federal salary, because a state can only pay based on its earnings. And if the revenue of the state government is very small, you cannot pay what the Federal Government is paying,” he stated.

Nzekwe, however, stated that states could use what the Federal Government pays to its workers as a benchmark, adding that state government workers might not earn higher than those in the federal civil service.

“I don’t think anybody will question this. But asking everybody to pay the same thing as what the Federal Government is paying will be very difficult to implement,” he stated.

The former ANAN president also explained that the cost of living differed in various states and that this should be considered in the payment of workers’ salaries and allowances.

Nzekwe further kicked against the mopping up of revenues from states to deposit in a central pool and sharing it among the three tiers of government.

This, he said, was limiting the abilities of state governments to effectively develop their capacities to generate additional revenues for their states.

“When you are talking of a confederation, which we are supposed to be running, you will realise that we are not actually practising it as expected.

“In America, where they run a confederation, it is what you bring from your area or state that you will use, while you contribute to the Federal Government.

“That is exactly what we have been clamouring for. Let the states spend what they get. The 36 states of the federation should be able to generate their own revenue and spend,” he said.

Nzekwe said states could be asked to contribute a portion of their earnings to the Federal Government, as it was not in the interest of state governments to always wait for the sharing of federal allocation before they could effectively operate.

“It is important to also mention that once state governments are allowed to generate their own revenue and spend, none of them will go to the Federal Government to collect money, rather they will strive to grow their IGR.

“States that produce oil, for instance, would have a lot of revenue and they will make some contribution monthly to the Federal Government. And every state will start working very hard to be able to generate revenue to cater for their people.

“This will make every worker in the state sit up and work. It will make the governors work. So, it is a good idea, because it will encourage growth in the economy,” Nzekwe stated.

Also speaking on the subject, the President of the Coalition of South-South Chambers of Commerce, Industry, Mines and Agriculture, Billy Gillis-Harry, said not all states had the financial wherewithal to comply with the salaries and wages approved by the Federal Government.

 “Of course, some of them might be able to pay the approved sum to their workers, but as it is now, many of them lack that ability. So, I think it won’t be out of place to allow them to work based on their capacities,” he stated.

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