Nigeria’s weak federal system is laid bare in the ongoing minimum wage debate. While soaring inflation pushes labour unions to demand a significant increase, state governors express concerns about the financial burden. 

Inflation in Nigeria has become a relentless foe, reaching a staggering 33.95 per cent in May 2024. This leaves N30,000 minimum wage earners struggling to afford basic necessities, impacting their well-being and potentially leading to increased poverty. The NLC is clamouring for workers’ well-being, arguing that a low minimum wage demotivates the workforce and reduces productivity. The union states that a raise that reflects the rising cost of living, allows these workers to meet their basic needs and maintain a decent standard of living. 

Meanwhile, NECA countered that any increase above N62,000 proposed by the government and organized private sector could lead to crisis and job losses. State governments also echoed these concerns, fearing that there would be a negative impact on businesses in their jurisdictions and a deficit for state coffers. 

This is a good time to remember that Nigeria’s federal structure adds another layer of complexity to the debate. Wealthier oil-producing states like Rivers and Edo (which already pay N70,000 minimum wage) might have greater capacity to handle a higher minimum wage compared to states relying on agriculture, such as Benue and Taraba. To put it into perspective, Rivers State collected N36.08 billion in federation allocation for May 2024 and has a monthly internally generated revenue (IGR) of N27 billion. Meanwhile, Taraba has a monthly IGR of less than N1 billion and got N9.24 billion federal allocation in the same May. This disparity creates tension, with unions pushing for a national standard that might not be feasible for all states. 

In several interviews on wage increase, governors and their spokespersons have emphasized that states will have to allocate their entire resources to salaries, leaving no resources for development projects. While the federal government’s focus is on national economic stability such as curtailing inflation and controlling food prices, this can lead to conflicting positions during negotiations, with the government favouring a lower minimum wage to manage their fiscal limitations. 

This minimum wage debacle reveals the shortcomings of Nigeria’s federal system. The inability to reconcile worker needs with the concerns of businesses and state governments highlights the need for a more effective framework for addressing national issues like minimum wage.