Amid calls by Nigerians for a lower cost of governance, the personnel costs of the 36 states in Nigeria for the 2024 financial year have hit N2.76tn, an analysis of the budgets by The PUNCH has revealed.
In 2023, the wage bill of the states according to their approved budget documents available on Open States powered by civic-tech innovation platform, BudgIT, stood at N2.26tn indicating that about N901.88bn had been added to the wage bill in two years and N501.16bn in one year.
The analysis of the data showed that most of the states have consistently increased their wage bill over the years. However, the increase made by Taraba State to its wage bill in 2023 was significant.
The sum of N37.62bn had been budgeted as personnel costs in 2023, however, the final budget showed a jump to N109.65bn. In terms of actual budget performance from January to September 2023, it was N28bn, which was far below the originally budgeted amount. The wage bill for 2024 stood at N54.47bn.
In 2024, the wage bill for Imo State surged by 134.12 per cent to N61.18bn from N26.13bn. The 2023 budget performance (January to September) stood at N20.35bn. About N30.19bn had been expended on wages in 2022 in Imo State.
Rivers State was another subnational whose wage bill nearly doubled in 2024. The approved budget for personnel cost in 2024 in the oil-rich state rose to N252.89bn higher than N128.78bn in the 2023 revised budget indicating about 96.36 per cent increase.
On the flip side, both Bayelsa and Ekiti States reduced their budget for personnel costs in the 2024 budget. Bayelsa’s wage bill dropped to N69.12bn from N81.77bn in 2023; a 15.47 per cent drop. Ekiti’s wage bill was marginal at a 1.21 per cent decline to N31.02bn from N31.40bn.
States with a wage bill above N100bn include Oyo (N132bn), Ogun (N122bn), Delta (N164bn), Akwa Ibom (N127bn), Lagos (N302bn) and Rivers (N252bn).
Meanwhile, about 12 state governors have appointed no fewer than 4,385 aides since assuming office in 2023, according to a recent report by Saturday PUNCH.
While some of the new governors hired fewer than 50 aides, others, especially the governors of Taraba, Ekiti, Niger, Enugu, Adamawa, Kano, Plateau, Akwa Ibom, Cross River, Borno, Yobe, and Kogi States, have so far appointed a combined 4,385 aides since coming into power last year.
While these governors go on their aide-hiring spree, their domestic and external debt profiles increased greatly within the first six months of their administrations.
According to the data published by the Debt Management Office recently, the domestic debt of Niger State increased from N121.95bn to N139.80bn in the six months between June and December 2023 under Governor Mohammed Bago.
Similarly, Plateau State’s domestic debt surged to N173.93bn from N157.62bn within the same period under Caleb Mutfwang.
The same is true for Cross River State, as its domestic debt moved from N204.05bn to N220.20bn in six months under Bassey Otu over the same period.
Also, about eight states incurred a total of $89,747,901 in external debts within the first six months of the new administrations, according to the DMO.
Cross River recorded the highest foreign debt increase during the period, as it moved from $153,168,738 in June to $211,125,104 in December last year. It was followed by Ekiti, whose external debt stock rose from $103,479,209 to $121,049,293.
Kano’s debt was the third highest, moving from $101,319,905 to $107,920,953, while that of Adamawa increased from $100,919,509 to $103,196,881.
Niger State’s debt rose from $66,791,105 to $68,056,534, and Taraba’s debt moved from $21,918,173 to $23,427,411.
The PUNCH reported in July that at least 24 states of the federation would not be able to pay workers’ salaries this year without having to wait for federal allocations from the central government.
Only 11 out of the 36 state governments of the federation can independently pay their workers’ salaries without depending on federal allocations, according to an analysis of the state governments’ approved budgets for the 2024 fiscal year.
The states with robust internal revenue are Lagos, Kano, Anambra, Edo, Enugu, Imo, Kaduna, Kwara, Osun, Ogun, and Zamfara.
The 24 states that cannot fund salary payments from their Internally-Generated Revenue, may have to rely on Federal Government allocations or borrowing from banks and related institutions.
The development also means that the respective wage bills of the affected states surpassed their various IGRs, raising concerns about workers’ productivity and state governments’ efficiency in internal revenue generation.
This plays out amid plans for a higher minimum wage. Although details of the new minimum wage are yet to be finalised, it is expected that it would bump the wage bill of states and even the Federal Government higher.
A recent report titled ‘The Nigerian New Minimum Wage: Implications For State Governments’ Budget Performance’ presented by the Managing Director/Chief Economist of Analysts Data Services & Resources, Dr Afolabi Olowookere, at a webinar organised by the Oyo State Chapter of the Nigerian Economic Society, ranked states according to their ability to pay a higher minimum wage based on their fiscal position.
The report indicated that states like Benue, Osun, Oyo, Yobe, and Kogi, which were in the bottom five, would struggle while states like Lagos, Imo, Zamfara, Kaduna, and Ebonyi would fare better.
In his presentation, Olowookere said the ability of states to pay a higher minimum wage was computed and ranked as a combination of the ratio of personnel expenditure to total expenditure, revenue, especially internally Generated Revenue, low debt profile, and the relatively high elasticity of personnel costs contribution to future revenue and expenditure.
The economist submitted that states need to improve their fiscal conditions to increase their ability to pay a higher minimum wage going forward.
Providing some of the ways that states can finance the new minimum wage, the report called for tax hikes but called for consideration of the “Current economic situation in which companies operate, many companies will also be struggling to increase wages, avoid over-taxing those already paying (raise tax base not rate), avoid multiple taxes to improve the business environment, invest in an efficient tax collection.
“Borrow funds, but consider the state’s current level of indebtedness. Note that interest rates are currently high. Borrowing to pay a salary is not a sustainable strategy. Seek aids and grants from FGN and development partners, but will need to use such assistance for development purposes to free resources for workers.”
Other proposals include the reduction of instances of ‘ghost’ and redundant staff, commercialisation of relevant state projects and facilities and tackling of corruption. Corruption needs to be significantly minimised with wastes and leakages avoided for States to be able to find resources to finance higher minimum wage sustainably.”
Speaking with The PUNCH, the economist said that some states that are struggling fiscally may decide to pay for political reasons.
“Based on the facts on the table, the more green you are, the more your ability to pay. The states that are tending towards red can pay, paying is political but this is an economic analysis to say that if you are spending a lot of your money on salaries, if your IGR cannot pay your salaries, it would be difficult for some states to pay a higher minimum wage unless they want to rely on federal allocation which is not stable. Lagos for instance can pay a higher wage from its IGR alone, Enugu too if you check the 2022 actual data but the other states cannot even pay.
“If the states who can’t pay decide to go ahead, their fiscal conditions would worsen because it is not even very good to start with except they can finance it through those methods proposed.”
Commenting on the need to reduce the cost of governance across the country, the Chairman of the Nigerian Institute of Quantity Surveyors in the Lagos chapter, Olujide Oke, recently said cutting needless spending and pruning the size of government appointees would help state governments have more funds to channel into crucial areas for development.
Also, Professor Seth Akutson of Kaduna State University, pointed out that with the new minimum wage, the wage bill will go higher, hence a need to rightsize the workforce and block leakages.
He said, “We don’t have social insurance for workers. The only way you can give people survival is to employ them. Some people are earning salaries but not going to work. They have to do away with those. You must understand that political consideration got those people the job, not qualification. Some of the governors have more than 1,000 aides, so you can imagine the impact on the wage bill. There are a lot of allowances, estacodes, and expenses that need to be cut off.
“Also, the workforce needs to align with the budget and ability to pay principle. Now that the wage has increased by more than 100 per cent, that N2.79tn you are talking about may get closer to about N5tn. They need to begin to rightsize the workforce. To look at the cost of governance, to negotiate a percentage decrease in the pay of some of the political appointees. Also, they need to close all the leakages found around governance.”
A professor of economics at Babcock University, Segun Ajibola, said, “The states must do all they can to raise internally generated revenue without putting undue pressure on their citizens. Secondly, they must reduce the cost of governance, block wastages, do proper streamlining of ministries, departments, and agencies, shun profligacy, and ensure accountability and transparency in government.
A former chief economist at Zenith Bank, Marcel Okeke, pointed out that the increase in the ministries and governance at the centre would trickle down to the subnationals and impact their wage bill.
“Most of the things these governors do are done out of political considerations and not economic ones, from the location of companies to the appointments of aides; special advisers, senior special advisers, and so on. There are notorious cases of governors appointing hundreds or thousands of assistants. What are those people doing and they are paid money? Can they not do with a fewer number of them?
“Do you know we have bloated staff? In some ministries that should only have about 100, they have 400 to 500, so a job that should be done by one person, you have about five persons hanging around. What some people do is to carry files and they have no job. When these states do staff audits, they report ghost workers. If they look into this area, they can reduce cost,” he said.
Also speaking on the development, the Executive Director of the Civil Society Legislative Advocacy Centre, Auwal Ibrahim, faulted the governors’ appointments, noting that the governors had followed the step of the President who also expanded portfolios of aides.
“The governors are equally copying what the President is doing, but sadly, this is not a positive thing that should be copied or should be done at all.
“So this system has to be disrupted to bring sanity to how public officials are spending, wasting, diverting, and appropriating resources. No country can survive this kind of indiscriminate spending and borrowing that we are seeing now in Nigeria”, he said.
The Chairman of the Centre for Accountability and Open Leadership, Debo Adeniran, condemned the development, urging the National Assembly to draft a legislation to curb such frivolous spending.
“It is part of the life governors are living by creating appointments for the boys. So it is unfortunate and it is unwarranted. It is not the right thing to do during this period.
“What we advised before now is to reduce the number of political appointees and to ensure they have optimal productivity. And what we are suggesting is the National Assembly should do a law that will peg the number of political appointees that the governors and other heads of MDAs can engage,” he stated
The Accountability Lab Country Director Country, Friday Odeh, criticised the Nigerian government for hiring more aides despite the country’s severe economic issues, including over 35 percent inflation.
Odeh argued that this decision exacerbates financial strain on state governors and worsens the economic hardships faced by citizens.
He believed that using limited resources for additional aides is imprudent and politically motivated, rather than addressing real development needs.
“Hiring more aides in an economy where the government claims there is no money and inflation is over 35 percent is insensitive and problematic.
“Nigeria government is facing financial difficulties, adding more aides is a strain on the lean allocations received by state governors (of which their revenue generation is not sufficient for the state) which is worsening the economic situation citizens are complaining about with bad governance and cutting down the cost of their luxurious lifestyle.
“Instead of using the limited resources on tangible projects and human development, expenses on aides is not a wise decision but for political reasons across all the states. the government is certainly not prioritizing the needs of the people they swore to serve but serving political interest,” Odeh noted.
The country director suggested that the government should focus on enhancing the efficiency of existing aides or investing in technology to streamline operations, rather than increasing bureaucracy and political patronage.
He added, “Adding more aides will not solve any development issues but rather increase bureaucracy.
“State government should explore other cost-effective measures, such as improving the efficiency of current aides or investing in technology to streamline operations that create unnecessary burdens for the states FAAC resources.”
Also, the Executive Director of the Rule of Law and Accountability Advocacy Centre, Okechukwu Nwagunma, lambasted Nigerian government officials for their lack of vision, sincerity, and patriotism.
Nwagunma pointed out that despite promises from the president to cut the cost of governance by reducing the number of appointees and ministries, the reality is the opposite—new ministries are being created, and a record number of appointees are being appointed.
He said, “The government at all levels in Nigeria is composed mainly of people who are visionless, insincere, unpatriotic, selfish, and insensitive to the suffering of the people they claim to serve.
“They do the opposite of everything they claim they will do. The president talked about reducing the cost of governance by pruning down the numbers of government appointees and ministries. But the president is busy creating new ministries and appointing the highest ever number of appointees, both as ministers and aides.
“The same thing is happening at the state levels. State governors appoint needless numbers of aides with almost every other aid having their aides. While the state of the economy continues to worsen, with government policies unable to alleviate the suffering of the majority of Nigerians who continue to groan in deprivation, poverty, and hunger, the same government officials continue to live in obscene and provocative opulence and extravagant lifestyles. And they ask Nigerians to be patient and to continue to make sacrifices.”