States’ Wage Bill Soars by N900bn Amid Governors’ Jobs Bazaar

State wages have surged by N900 billion following a series of job creation initiatives led by governors. The increase highlights significant financial implications for state budgets.

An analysis of the budgets reveals that despite Nigerian citizens’ demands for reduced governance expenses, the 2024 financial year will witness personnel costs amounting to N2.76tn across all thirty-six states in Nigeria.

As per the budget documents available on Open States, a civic-tech innovation platform by BudgIT, the total wage bill of states in 2023 amounted to N2.26tn. This shows an addition of N901.88bn over two years andN501.16bn within one year to the wage bill figure.

Upon analyzing the data, it was revealed that a majority of states had steadily augmented their wage bill throughout the years. Nonetheless, in 2023 Taraba State made an exceptional hike to its payroll expenses.

The initial plan projected personnel costs at N37.62bn for 2023, but the final budget indicated a significant increase to N109.65bn. Nevertheless, actual performance from January through September of that year was only N28bn—well short of the original projection. Moving forward into 2024, the estimated wage bill stood at roughly half that amount: specifically, N54.47bn would be required to cover expenses in this area during that period.

Imo State’s wage bill experienced a significant increase of 134.12% in 2024, rising to N61.18bn from the previous year’s N26.13bn figure. The budget performance for January-September of 2023 was recorded at N20.35bn while wages amounting to about N30.19bn were already paid out in Imo State during the preceding year of 2022.

In 2024, Rivers State experienced a significant increase in its wage bill. The approved personnel cost budget rose to N252.89bn from the previous year’s revised budget of N128.78bn, indicating an approximately 96.36 percent rise for this economically important state which receives revenue from oil resources.

Conversely, the budgets for personnel costs in Bayelsa and Ekiti States were decreased in 2024. In comparison to 2023 figures, Bayelsa’s wages lowered by 15.47% from N81.77bn to N69.12bn. On the other hand, Ekiti experienced a relatively minor decline of only 1.21%, with their wage bill reducing from N31.40bn to N31 .02 bn.’

Oyo (N132bn), Ogun (N122bn), Delta (N164bn), Akwa Ibom (N127bn), Lagos(N302 bn) and Rivers(N252). These are the states with a wage bill that exceeds N100 billion.

As per a recent report by Saturday PUNCH, approximately 4,385 aides have been appointed by at least 12 state governors who took office in the year 2023.

Since taking office last year, some governors have hired fewer than 50 aides while others, particularly those of Taraba, Ekiti, Niger Enugu Adamawa Kano Plateau Akwa Ibom Cross River Borno Yobe and Kogi States, have collectively appointed a staggering total of 4,385 aides.

During the first six months of their administrations, these governors significantly increased their domestic and external debt profiles as they went on a hiring spree for aides.

Governor Mohammed Bago presided over an increase in Niger State’s domestic debt from N121.95bn to N139.80bn during the six-month period between June and December 2023, as per data recently published by the Debt Management Office.

During the same time period under Caleb Mutfwang, there was a rise in Plateau State’s internal debt from N157.62bn to N173.93bn.

Similarly, Cross River State witnessed a surge in domestic debt under Bassey Otu’s leadership with figures increasing from N204.05bn to N220.20bn within six months as well.

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The DMO reported that eight states accumulated a combined external debt of $89,747,901 during the initial half-year period under the new administrations.

During the period, Cross River saw the largest surge in foreign debt with an increase from $153,168,738 to $211,125.104 by December of last year. The state that followed was Ekiti whose external debt stock climbed from $103,479209 to 121049293 USD.

The debt of Kano escalated to $107,920,953 from $101,319.905 and it became the third highest indebted state; meanwhile Adamawa’s debt increased from $100,919509  to$103196881.

The debt of Niger State increased from $66,791,105 to $68,056,534 while Taraba’s debt escalated from $21 918 173 to $23 427 411.

At least 24 states in the federation were projected to be incapable of paying their workers’ salaries this year unless they rely on federal allocations from the central government, as reported in July.

An analysis of the approved budgets for the 2024 fiscal year has revealed that only eleven state governments in the federation have sufficient funds to pay their employees’ salaries without relying on federal allocations.

Lagos, Kano, Anambra, Edo, Enugu Imo Kaduna Kwara Osun Ogun and Zamfara are the states with a strong internal revenue.

The 24 states that are unable to finance salary payments through their own generated revenue may need to depend on grants from the Federal Government or seek debt financing from banks and other financial institutions.

Concerns arose as the accompanying growth caused the wage bills of impacted states to exceed their individual IGRs, leading to questions regarding both worker productivity and state government efficacy in generating internal revenue.

Amid discussions of a higher minimum wage, this scenario unfolds. Although the specificities regarding this new policy are still being worked out, it is anticipated that states and even the Federal Government will see an increase in their wage expenses as a result.

During a webinar organized by the Oyo State chapter of the Nigerian Economic Society, an Analysts Data Services & Resources Managing Director/Chief Economist named Dr. Afolabi Olowookere presented a report titled “The Implications for State Governments’ Budget Performance as Resulting from The Nigerian New Minimum Wage.” This report ranked states based on their financial position to pay elevated minimum wages.

According to the report, Benue, Osun, Oyo, Yobe and Kogi – states that ranked in the bottom five – would encounter difficulties. Meanwhile Lagos, Imo Zamfara Kaduna and Ebonyi were projected to perform better.

During his presentation, Olowookere computed and ranked the ability of states to increase their minimum wage. This computation was based on a combination of factors including the ratio of personnel expenditure to total expenditure, revenue from internally generated sources, low debt profile as well as relatively high elasticity in terms of how much personnel costs affect future revenue and expenses.

According to the economist, enhancing their financial situations is imperative for states in order to elevate their capability of implementing an augmented minimum wage policy.