•Experts differ on how it affects fiscal federalism

By Uche Chris

Nigeria’s revenue sharing structure is about to undergo major changes following the report of the Revenue Sources committee, headed by Mr. Bismarck Rewane, for the implementation of the new minimum wage of N30,000. It was learnt that the federal government has accepted to cede certain percentage of its revenue allocation share to the states to enable them pay the new minimum wage.

State governors under the aegis of Governors’ Forum had mounted stiff opposition to the N30,000 approved by the National Assembly and accepted the federal government insisting that they could not pay; instead the proposed N24,000. They had also proposed a change in the revenue allocation formula if they were to pay.

Most states governments in the past four years had relied on budget bailout from the Central Bank of Nigeria, and budget support from the Paris Club debt relief refund to meet statutory salaries and pensions. The new minimum wage is expected to raise their personnel cost to as much as 68 percent, according to experts.

The Rewane committee had recommended an 85 percent Value Added Tax, VAT, revenue for states not more than five percent reduction in federal allocation, and access to forex by states at the official window rate of N305 per dollar. It was learnt that government has already proposed amendment to the existing revenue formula which will be sent to the National Assembly for enactment into law.
State governments were prevailed on to accept the new minimum wage on the promise of a review of the existing revenue allocation formula to increase their share.

Government had set up the Bismarck Rewane committee for the sources of revenue to ensure the implementation of the new wage policy, but labour appears to have thrown spanners in the work with their demand for a higher rate of “Consequential Adjustments” across the other grade levels to reflect the new minimum wage.
The federal government has attributed the delay in the full implementation of the N30,000 new minimum wage to the unrealistic demand of labour unions for a 68 percent “Consequential Adjustment” across the board.

The chairman of the National Salaries, Income and Wages Commission, NSIWC, Chief Richad Egbule, said last week that there is still no end in sight for the implementation unless labour shows understanding. Egbule said that the current demand by the labour unions would raise the total wage bills too high and that was why government could not accept their proposed salary adjustments.

“Labour is asking for consequential adjustments and government in its wisdom had made budgetary provision for an adjustment of N10,000 across board for those already earning above N30,000 per month. However, the unions have refused this offer, saying that because the increase in minimum wage from N18000 to N30000 was 66 percent, therefore, they want a 66 percent increment across board.

“We told them the increase in minimum wage was not effect on the basis on percent but as a result of the consideration of the economic conditions and other factors including the ability to pay”, he said.

However, we said that if they want adjustments in percentage terms then we will use a percentage that when applied will not exceed what is provided for in the budget.

“The computation based on percentage which government had given to labour was 9.5 percent from levels 7 to 14, including level 1-6 of those salary structures that did not benefit from minimum wage; and then five percent from level 15 to 17. Labour contended that the offer and proposed 30 percent increase for level 7 to 14, and 25 percent for Level 15 to 17.

“One point we keep repeating is this; it will be unfair that because you gave the person earning minimum wage N12000, you give a Level 17 officer N100,000 if you apply 25 percent”, he said.

It was learnt that the committee justified the minimum wage because of the growing inequality in the country, which has serious social consequences for society in terms of the rising crime rate, and the need to boost demand which will encourage manufacturers to raise capacity utilisation and production, as well as generate more employment.

“The poor can’t sleep because they are hungry; and the rich can’t sleep because the poor are awake”, Mr. Rewane said recently in a programme.

However, analysts believe that tweaking the revenue formula could be a back door channel of achieving fiscal federalism. This point was made by Barr. Wale Ogunade a human rights activist and convener of Electoral Reform.

“Obviously, it is what we have been advocating; the federal government cannot control everything and achieve much result. It is not right for the government to control most of the resources because development takes place in the states and local governments. What is happening is inevitable because to continue the way we are going will lead to a break down in governance. Indeed, you can’t pay N30000 minimum wage without doing something about what goes to the states to be able to pay workers salaries.

“Paying workers’ salary is important because it affects the economy, because when you pay workers it stimulates demands and helps to improve the economy as manufacturers will be motivated to engage more people thereby creating employment.

“It is also important that the adjustment be across board; Labour is right to insist on it because how can you pay some people are not the others. Everybody must be motivated to put in their best; a worker whatever their level should be able to afford the basic things of life for them to be able to make the needed contributions to national development”, he said.

However, Chief Emma Nwosu, a former banker executive and financial analyst, disagrees, insisting that we have to do more to achieve fiscal federalism.

“It is nothing really – just crumbs from the table of the master to appease people; moreover, it is for everybody and does not change the status quo. Fiscal federalism is essentially that each state or region should control what they produce and send a percentage to the centre; does this tinkering with the revenue sharing formula affect the basic element of derivation and control of resources; truly it does not go far enough.

“Until the constitution is amended to change the political framework of the country, which I believe this government cannot do, what they are doing is mere window-dressing to deceive people. We have to return to what we had in the first republic which is what the founding fathers left for us and had a semblance of federalism. What is happening now is a joke. The Rewane committee tried but they did not go far enough; the issues go beyond minimum wage and adjusting revenue formula.

“Labour demand for 68 percent consequential adjustment in salary across board is a function of the stupidity of the system; how could the federal government be negotiating for states in a federal system; it is unacceptable. The adjustment should be allowed above Level 7; it is abnormal to pay a Level 17 officer, who already earns about N500,000, extra N100000 because you agreed to pay N30,000 to Level One; where is the justice. These people are just fighting for themselves and not those they represent. Salary is not the only source of income for them; there are other conditions of service such as leave allowance, housing and other benefits; the focus on salary is misguided”, he said.