As the new governors settle down to the business of governance from May 29, they will face a plethora of challenges, the biggest of which will be how to develop their states and specifically, how to pay the new minimum wage and the enhanced salaries of their workers.
Recall that most of the states (excluding Lagos, Ogun, Rivers, Edo and probably Kwara) do not have enough Internally Generated Revenue (IGR) to keep them afloat. The rest are in messy financial positions, a fact which makes them to always look up to Abuja for financial bailouts.
Even the Federal Government was overwhelmed by the implications of the new minimum wage and how to fund it. It set up an advisory committee of experts to advise it on how to fund the new, bloated salary of federal workers as a result of the implementation of the new minimum wage of N30,000 and the enhanced pay of federal workers.
The states will do well to follow the example of the Federal Government by setting up advisory committees to look at how to better fund the new minimum wage and its implications for the growth of the states.
Experts have been warning that most states may not be able to pay the minimum wage. The states were forced to accept the N30,000 minimum pay because of the looming elections and since no governor wanted to lose, they had to acquiesce to the new minimum wage. Now that the elections are over, the states will have to face the consequence of their hurried acquiescence to the new minimum wage.
With rising poverty across the country, can the new minimum wage help to improve the lot of the poor in the country? No. It must be noted that wage increase does not even guarantee improved productivity in the public service. In fact, it may throw the state governments into deeper financial turmoil.
It must also be noted that in Nigeria, poverty is on the rise on daily basis. Recall that Nigeria has the unenviable record of being the world’s capital of the poorest of the poor. Recall, too, that the United Nations, African Development Bank and the British Prime Minister, Theresa May, have described Nigeria as the global poverty capital.
On its part, AfDB estimates that 80 per cent of Nigerians are living in extreme poverty. Also, some 2.3 million people in Adamawa, Borno, and Yobe are facing acute food shortages due to insurgency. Also, Nigeria is one of the 37 countries in need of external food assistance. In the face of all these disheartening statistics, how will the Federal Government and the various states face the looming seeming inability to pay the new minimum wage without disrupting their efforts to pull the country out of poverty level?
Looking ahead, and against the backdrop of the hard realities of the nation’s economy, it would appear that the nation is heading for a tough and rough 2019. However, a mixture of solutions may help the country to head off the unpalatable consequences of the country going down the hill again.
First, both the federal and the state governments must look inward to develop their economies. Each state must concentrate on what it can produce or manufacture for the local and for the export markets. The Federal Government must ensure that Nigerians buy only made-in-Nigeria goods. Both the federal and state governments must adhere to this so that the citizens can take a cue from their examples.
Second, the lingering slow growth of Nigeria’s economy needs a mixture of solutions. The new initiative of the Bankers’ Committee, Nigeria Incentive-based Risk-sharing System for Agricultural Lending, through which NIRSAL Micro Finance Bank was created to provide loans to Small and Medium Enterprises at five per cent interest rate, with seven years tenor and a two-year moratorium, is an excellent home-grown initiative which the President must use to turn around the economy. The new initiative promises to greatly increase productivity in agribusiness in the country.
Third, apart from using home grown solutions, the federal government must adapt good policies from other lands to stimulate the nation’s growth to prosperity. Recall that following the financial meltdown of 2008, Portugal, with about 40 per cent youth unemployment, came out of recession by using bail outs, tax cuts and other policies to stimulate demand and boost economic recovery.
Also, Spain recovered from the recession by creating one million jobs and using policies to stimulate industrial growth and 5 per cent growth in industrial production. There is a need for Nigeria to learn from other nations that had faced hard times in the past and adapt their solutions to our present situation.
In addition, the state governments must act as self-sustaining units and primary drivers of the economy. They must use their competitive edge in whatever field (agriculture, mining and manufacturing, among others) to compete for investments and markets. State governments must, like the Federal Government, without delay, create the much-needed enabling environment for investments, job creation and export diversification.
Above all, there is a compelling need to discipline the states and let them imbibe the culture of living on their resources. Towards this end, the Federal Government should no longer guarantee foreign loans for any state unless the foreign loan is tied to infrastructure projects that can generate their repayments.
