Minimum Wage And The Revenue Debate (I)

In November 2010, the National Council of State (NCS) okayed President Goodluck Ebele Jonathan’s proposal on the N18,000.00 minimum wage structure.

Apparently, the NCS ratified the increase in the country’s minimum wage from the former N7,500 to improve the dispiriting living condition of the workers. According to media reports, the NCS deliberated extensively on the need for a new minimum wage for Nigerian workers before the ratification. And following the approval, the council (NCS) advised President Jonathan to send a Bill to the National Assembly requesting it to enact the N18,000.00 as a minimum wage not only for the federal government but also for  workers in the  services of state governments and other employers of labour including private organisations with 50 or more employees on their payroll.

The NCS is composed of the President, Vice President, Senate President, Speaker of the House of Representatives, the 36 governors, past Heads of State, Chief Justice of the Federation, Attorney General of the Federation and Minister of Justice. The council which is an advisory body is presided over by the president.

Nigerian workers, like their counterparts across the world have continued to demand for salary increase and improved conditions of service over the years. In spite of a barrage of labour decrees enacted during the military rule in the country, Nigerian workers particularly those in the public service still secured a minimum salary of N100.00 for the West African School Certificate holders in 1978. And in 1981,1988,and 1998, the minimum wage for workers rose to N125.00, N250.00, and N3,500.00 respectively.

Thus, even the military regime recognised the legitimacy of workers to participate in decisions affecting their interests and to make demands for a better working condition. Indeed, apart from setting up the National Industrial Court as the last institution in the apparatus for settlement of trade disputes, military administration established a central labour organisation in the country with  funds to build its administrative infrastructure and acquire the strength and ability for the leadership of its constituent unions.

So Nigerian workers expect such a democratic administration as this to respond more positively to the needs of workers without   much ado, as raising their socio-economic wellbeing would strengthen them as veritable instruments of social change and national progress. This is to say that there should be no further delay by both the public and private sectors in paying the N18,000.00 minimum wage which has been signed into law by President Jonathan.

Wage increase gives workers and their families the confidence that their level of living and quality of life would not, in so far as possible, be eroded by any social or economic contingency, including inflation. It strengthens the worker’s feeling of security and helps him or her to make possible socio-economic adjustments.

Considering the present revenue allocation formula in which the federal government takes 52.68 per cent of the centrally collected revenues in the distributable pool account with the states and local government councils having only 26.72 per cent and 20.60 per cent respectively, it will certainly not be easy for some governors to pay the new minimum wage which has become binding on the public sector and private organisations with 50 or more employees.

This is the crux of the clarion call by the Governors’ Forum headed by the Rivers State Governor, Rt Hon. Chibuike Rotimi Amaechi for a review of the revenue allocation formula. At the inaugural meeting of the forum, Governor Amaechi was quoted as saying: “Some States will need to go a-borrowing to be able to pay the new wage” According to media reports, the forum has already set up a revenue panel with the Lagos State governor, Babatunde Fashola as its chairman. The panel’s recommendation that the federal government should retain 35 per cent of the centrally-collected revenue and give to the states and local government councils 42 per cent and 23 per cent respectively has been forwarded to the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) for its inputs and transmission to the National Assembly as a bill. But until the document is signed into law the states and the local government councils will have to contend with the present revenue allocation formula which they feel does not reflect the principle of true federalism.

Strictly speaking, revenue allocation constitutes a fundamental problem in federal finance due to, among other things, the organic structure of the system. As observed by B.O. Nwabueze in his book, “Federalism in Nigeria under the Presidential Constitution: “Federalism presupposes that the national and regional governments should stand to each other in a relation of meaningful independence resting upon a balanced division of powers and resources sufficient to  support the structure of a functioning government able to stand on its own against the other”.

The solution to the ding-dong between the states and their workers on the payment of the new minimum wage on one hand and the states versus the federal government over the review of the revenue allocation formula on the other hand is to be found in the practice of true federalism by the Nigerian state.