Minimum Wage And The Revenue Debate (I1)

The N18,000.00 minimum wage and revenue debate has assumed many colours and shapes following the delay in implementing the national wage law which has become binding on the public sector and private organisations employing 50 or more workers.

The state governors led by Rt. Hon. Chibuike Rotimi Amaechi of Rivers State have continued to argue that with the present revenue allocation formula in which the federal government takes 52.68 percent of the centrally-collected revenues in the distributable pool account leaving the states and local government councils with only 26.72 per cent and 20.60 per cent respectively, they would not be able to pay the N18,000.00 minimum wage and meet the critical developmental challenges of their states.

Thus they are asking for a review of the revenue allocation formula that would give the federal government, states, and local government councils 35 per cent, 42 per cent, and 23 per cent of the centrally-collected revenues respectively. They are also asking for the removal of fuel subsidy which reportedly consumes over N693 billion annually from the federation account.

On the other hand, the Nigeria Labour Congress argues that the states have enough resources to implement the Minimum Wage Act which was signed by President Goodluck Jonathan in March. To the labour union, if the state governments cut down on their huge and excessive expenses on governance, they would have enough money to pay the wage and fulfil their socio-economic obligations to the people. The union posits that payment of the minimum wage is not debatable considering that it was agreed by the government, the organised labour, and the other stakeholders. In fact the labour union has urged the state governments to pay the minimum wage which implementation date was April 1 without further delay in order not to accumulate too much arrears.

From media reports, some well-meaning Nigerians have also lent their voices to the debate. They include Professor Solomon Akinboye, Head of Department, Political Science, University of Lagos, Prof. Itse Sagay (SAN), and Alhaji Hamman Tukur, a former chairman of the Revenue Mobilisation, Allocation, and Fiscal Commission (RMAFC). According to Prof. Akinboye, the problem with Nigeria is that of inability to manage its resources very well. He feels that the revenue allocated to the states from the federal distributable pool account should be increased to enable them (states) meet their financial needs.

Prof. Sagay, on his part, supports the labour union that the state governors must pay the N18,000 minimum wage. To him: “They (State governors) have no choice in this matter. It is high time Nigerians, particularly the political elite began to distinguish between when they have discretion, and when they are compelled. On this matter, they are compelled to pay. It is a legal issue and they must adhere to it.”

In his own contribution to the debate, Alhaji Tukur argues that in view of the money that comes into the Federation Account, the states can pay the N18,000.00 minimum wage without removing the subsidy on fuel. In his words: “The money they (governors) get from the Federation Account alone is enough to pay workers. It is unfortunate that the burden is being passed on to the ordinary man.

“There is enough resources in the country for all. The problem is that the federal and state laws clash. The federal law cannot impose on the state what to do with the money they get from the federation account.  Also, the state cannot impose on the local government what to do with their money. The laws are there and the fact remains that the governors can pay the new wage”.

In the final analysis, the minimum wage and revenue debate shows the pervasive nature of the social, economic, and political problems of the country. Though compared with such old federations as the United States of America (USA), Australia, and Canada, Nigeria is still a fledgling federal nation, it is old enough to have settled its basic socio-economic and political framework.

Since 1946 when the problem of revenue allocation began in Nigeria following a change in the country’s constitution from unitary to a federal one several ad hoc commissions or committees on revenue allocation have been established. They include the Philipson Commission (1946), Hicks – Philipson Commission (1951), Chick Commission (1953), and Raisman Commission (1958). Others are Binns Commission (1964), Dina Interim Revenue Allocation Review Committee (1968), Aboyade Technical Committee on Revenue Allocation (1977), and the Okigbo Commission that was appointed in 1979 to review the existing system of revenue allocation with respect to such factors as national interest, derivation, population, even development and equitable distribution, and equality of state.

Nigeria has also had a long history of grants by which the national government remitted to the federating units funds outside their statutory allocations to assist them perform their social and economic functions. But because of the uncertainty surrounding these grants, the irregularity in their disbursements, the vagaries of their timing, and the frequency and sometimes the sudden change in the federal government’s priorities, the practice of grants has not been used as an effective system of rescuing the states from the problems of resource constraints in respect of meeting their constitutionally  determined obligations.

Another problem associated with the minimum wage and revenue allocation quagmire is the over reliance of the states on the distributable pool. As  B.O. Nwabueze noted in his book Federalism in Nigeria Under the Presidential Constitution, “Federally-collected revenue is the mainstay of the finances of the state governments, accounting for a little over 90 per cent of their total revenue. Upon this revenue, therefore depends the ability of the state governments to maintain their services; to pay their staff, pay for essential supplies and execute their capital projects. Their financial viabilities and credibility as autonomous government units hang upon it. As far as they are concerned, the motivation for its sharing is understandably one of self-survival.

For them, the sharing is almost like a matter of life and death, exciting their deepest concern and their strongest emotions. Hence the intensity of the question concerning it.”

So until Nigeria runs a true federal system in which the national and state governments stand to each other in a relation of meaningful independence and balanced division of powers and resources sufficient to support the structure, issues such as payment of minimum wage and revenue sharing will continue to generate national debate, political pressures and even inter-regional struggles for the national wealth.

As things stand now, the state governments, local government councils and other  public and private organisations with 50 or more workers on their payroll must rise to the challenge of paying the N18,000.00 minimum wage for the law of the land must be respected.