The former Commissioner of Finance in Lagos state, Dr. Adebayo Adewusi, recently asserted that the new minimum wage of N30,000 will lead to many states becoming bankrupt.
This is because many states do not have the capacity to implement the new wage placed on them. Dr. Adewusi argued that things could get worse if there is ever a decline in revenue.
Inflation and minimum wage: Dr. Adewusi went further to state that back in 2015, N30,000 was lower in value when compared to the initial N18,000 minimum wage. This situation is due to the current level of inflation in the country and the exchange rate.
“The N30,000 minimum wage in real terms is desirable at this time, given the level of inflation and the exchange rate as at now. From analysis, in 2015 before the President Muhammadu Buhari-led administration came on board, the minimum wage of N18,000 was $122, now the minimum wage of N30,000 today is about $85.
“So, if you look at it in real terms, you will say it is still not enough, but the truth is that even the N30,000 that we are talking about, many of the states cannot pay, they do not have the capacity to pay and that is the simple truth.” -Adewusi
“What this means is that there is the need to do a total review of the revenue sharing formula. Except that is done, there is no way many of the states will pay and it will create a serious destabilising effect on the operations and the economy of many states. Even when it was N18,000, many states could not pay.
“We are all witnesses to the constant interventions to states in the name of bailout funds that the Federal Government gave as support. Right now, many states are still owing several months of unpaid salaries and pensions.
“So, it is a serious matter, and if what we are projecting comes to pass, of course, there is going to be serious ‘wahala’ because at the end of the day, if prices of crude oil come down, it means allocations to states will decline. When this happens, it means that the states would work extra hard to source for their own Internally Generated Revenue, otherwise many states will be bankrupt. It is the truth and reality of it.”