Fresh crisis is looming across the country over the faceoff between the Nigerian Governors Forum, NGF and organised labour over the payment of the N18, 000 minimum wage to workers in the public sector.
The governors sparked the crisis when they declared that due to dwindling allocation from the federation account, they could not afford to foot the wage bill in their respective states.
The chairman of the Nigerian Governors Forum and Zamfara State governor, Abdulaziz Yari, was emphatic that irrespective of public condemnations, it would not be economically feasible to retain the same workforce and still pay the N18, 000 minimum wage.
According to him, funds allocated from the Federation Account could no longer sustain the expenses of the state as the internally generated revenue was still below par in some states.
He said, “Let me make it very clear to Nigerians, governor’s forum is not the enemy of labour in any way. Rather, we have been working together. But what we are saying, (because not only Gov. Wike but also my friend in the comradeship, Adams Oshiomhole, kicked against the decision). What we said is that when the National Assembly enacted the law of paying N18, 000 minimum wage, then the oil was about $118 per barrel and today where we are oil is $41 per barrel.
“So, if it continues like that definitely we will find it difficult to continue. We have to sit down with the labour and see how we can review; either continue or downsizing, or see what we are going to do. We want to find a solution because we have to be realistic that we have so many things to touch.
“There is infrastructure deficit, there is need for security, there are other things like social lives of our people and nation as a state,” he said.
“And there are other issues, not even the salary, their pension is over a billion. So, how can we continue borrowing and servicing the service aspect of our expenditure, or overhead. How can we do that?
“But what we have on ground now will not be realistic if it continues the way it is without having other sources from the economy and still relying on oil that is being sold for $118 dollar per barrel and now down to $41 and think that we can continue behaving or misbehaving the way we are doing, if there is anything like that,” he added.
However, the governors of Ekiti, Edo and Delta States distanced themselves from the plan by their successors to slash the minimum of workers in their states. Governor Ayo Fayose spoke the minds of his Edo and Rivers counterpart when he advised the labour movement to resist further attempt by governments at all levels to impoverish the workers.
Speaking through his Chief Press Secretary, Mr. Idowu Adelusi in Ado Ekiti, Fayose added “the N18, 000 minimum wage under the present economic crunch has become grossly inadequate for the workers not to now talk about reducing it.”
The governor said he would not be part of any plan or meeting to slash workers salary under whatever guise, saying governors should rather come to the level of the people they govern and explain to them the economic situation on ground.
He said, “In my state, I have transferred power back to the people and the labour movement cannot claim not to know what comes to the state monthly as allocation and how it is appropriated. I don’t play to the gallery, I don’t deceive people, Ekiti people understands me quite well because I make my administration very transparent.
“Therefore, let me reiterate, notwithstanding the economic situation starring us in the face, I will neither retrench nor slash workers’ salary in my state.”
The labour unions have already picked up the challenge and are gearing to tackle the Governors of the 33 states of the federation that are in favour of cutting the minimum wage.
The pronouncement has triggered stern objections by various workers’ groups in the country, with organised labour threatening to shut down the country should the governors insist on taking the decision.
The President of the NLC, Ayuba Wabba, spoke in strong terms against the governors’ declaration saying, “Nigerian workers would vehemently and totally reject it.”
Another labour leader, Joe Ajaero, dismissed the governors’ resolution as “empty threat that should be ignored.”
“The governors should not start a battle they would not sustain or finish, because Nigerian workers have the capacity to retrench them,” Mr. Ajaero said.
The chairman of Rivers State chapter of TUC, Hyginus Onuegbu, said while they agreed Nigerian economy was in bad shape due to the fall in oil price from $115 per barrel in June 2014 to about $38 per barrel today, the current situation of the economy was as a result of poor governance and corruption by the political class.
The congress chairman said the political leaders at all levels did nothing to stop the unprecedented oil theft of some 400,000 barrels of oil per day, which, according to him, had resulted in the loss of huge revenues that should have accrued to the Federation Account.
The political leaders, Mr. Onuegbu said, also refused to diversify the country’s economic base away from oil and gas, while neglecting to push for the passage of the Petroleum Industry Bill, PIB, as well as made no savings for the rainy day from the excess crude account, which has been depleted to about $2 billion today. Nigerian workers will not accept any reduction in the meagre N18, 000 minimum wage,” Mr. Onuegbu said.
Some political analysts, who argue that the state governors are lazy, indolent and lack initiative in improving their internally generated revenue, IGR, punctured the argument of the governors that dwindling allocation from the federation is the reason they want the national minimum wage slashed.
Opponents of the position of the governors are of the view that if Lagos State survived for over 29 months, when former President Olusegun Obasanjo withheld allocation to all the local government councils in the state, over the creation of additional councils by former Governor Ahmed Tinubu, there is no reason why any other state cannot do same if they work on their IGR.
Unlike most states that are always coming to the nation’s capital cap in hand at the end of every month for allocation from the federation account, Lagos state was able to survive because of the resourcefulness and aggressive IGR drive by the state government. Granted that some of the states are not as endowed as Lagos state, there is no gainsaying the fact that some states simply pay little or no attention to revenue drive in their states.
This parlous state of affair has led to the renewed call for a return to fiscal federalism, which is believed will force every state to look inwards rather than running to Abuja for every dime they need to run their state.
Politics of revenue sharing is said to be as old as the republic of Nigeria. The issue of Fiscal Federalism has engaged various commissions and committees since the colonial days. Between 1948 and today, nine commissions, six military decrees, one Act of the legislature and two Supreme Court judgements have been resorted to in defining and modifying fiscal interrelationships among the component parts of the federation. The first phase of the development of fiscal federalism in Nigeria occurred during the 1948-1952 period. This phase was marked by a centralised financial arrangement in which the excess in the budget of the central government was allocated to regional governments on the principle of derivation.
In the second phase (1952-54) autonomous revenue and tax jurisdiction for the regional governments was introduced in addition to the operation of the principle of derivation for the sharing of federally collected revenue. The basic elements of the second phase were carried over to the third phase (1954-59). A major distinguishing factor of this phase was the emphasis on the derivation principle in the sharing of federally collected revenue.
This pleased the Northern and Western Regions given the boom in their export commodities: cotton and groundnut in the North and cocoa in the West. The Eastern Region, whose main export crop; palm oil, was facing difficult times in the global market, was unhappy with its application. In general, this was the period of state-centred fiscal federalism. It has remained the reference point by present day proponents of either higher emphasis on derivation or resource control, especially minorities of the oil-producing areas. The stalemate over this matter during the 2005 National Political Reform Conference led to the subsequent walkout by delegates from the South-South region.
During the first republic the 1960/63 constitutions provided for 50 percent derivation in respect of revenues from all minerals. All the regional governments were able to achieve giant stride in various sector of their region as the revenue allocation arrangement made it possible for them to reap maximally from the efforts they put into avenues that will yield them revenue. This scenario made the central less attractive and this was one of the reason the then Premier of the North and leader of the Northern People’s Congress, Sir Ahmadu Bello, declined to rule at the centre after his party emerged victorious in the 1960 election.
During that glorious era the revenue of the country was distribute on the basis of principles of deprivation. Fifty percent of the revenue from mineral resources accrued to the region from where these minerals were extracted. Thirty percent was put in a distributable pool, which was divided among all the regions, including the producing region on equal basis. Only 20 per cent of the revenue went to the federal government. The military intervention in 1966 that came in with Unitarianism brought new changes as the federal constitution of 1963 was suspended. First, in most instances, the federal government took over state and local government functions for a variety of reasons. Consequently, new tax measures were introduced including the transfer of legislation and administration of mining rent and royalties to the federal government; centralisation of the marketing boards while the federal government administered all taxes, surpluses and fixing of producer prices.
The military government also took over right to revenue emanating from company income tax, import, export, petroleum profit, PPT, excise taxes and mining royalties and rents; introduced uniform rates in personal income and sales taxes while the states were to administer the taxes.
The administration of former President Olusegun Obasanjo replaced sales tax with value-added tax (VAT) in 1994 and subsequently transferred to federal government for purpose of regulation and administration while the proceeds are paid into the VAT Account for distribution among the tiers of government. The import of the changes, which the military introduced from 1966, was that revenue potentials of the state governments were eroded. Discouraged by the unitary drift of the military government, most of the states went to sleep and never bordered about tapping resources in their states since the bulk of the revenue will be moving to the federal government in Abuja.
Some have argued that the 1999 constitution violates the principles of federalism in relation to revenue allocation. In developed federal systems, the federating units have the right to control their resources and pay appropriate taxes to the federal government. To achieve true federalism, section 144(1) subsection 3 of the 1999 constitution should be amended so that ownership and control of all resources will be vested in the federating states. The vexatious section provides that “the entire property in and control of all minerals, mineral oils and natural gas in, under or upon any land in Nigeria or in, under or upon the territorial waters and the exclusive economic zone of Nigeria shall be vested in the government of the federation….”
Equally due for amendment is section 162 of the constitution so that the federating units will pay taxes to the federal government from the resources in their areas while Section 315(5)(d) relating to the Land Use Act should be reformed to guarantee the access of people to land and adequate compensation to those whose lands have been taken for public use.
Rather than dissipate energy trying to rationalise the cut in minimum wage, state governments should consider the option of championing the clamour for return to fiscal federalism and true federalism. Those core areas where the regions were generating income should be returned to the states, which consequently will lead to devolution of power from the federal to the states and local government councils. There is no doubt that it might take some time for some of the states to find their feet when fiscal federalism is re-introduced in the country because of decayed infrastructure. There should be a window period during which states that lack the machinery and capacity to improve their revenue-yielding avenues, are assisted by the federal government and neighbouring states to meet the emerging challenges.
Fiscal federalism will further encourage healthy competition between the states as witnessed during the first republic where laudable project initiated in one region is quickly replicated in other regions. It will boost inter-state relation as several contiguous states can come together to execute projects that, otherwise, might be too expensive for individual state to execute like the power project all the South-South states are jointly financing.
The fear that fiscal federalism will strangulate some states is misplaced as every part of the country is richly endowed with one mineral resource or the other. For instance, Adamawa State is blessed with abundant Kaolin, bentonite, gypsium, amethst (violet), lead/zinc and uranium while Benue State has lead/zinc, limestone, iron-ore, coal, clay, marble, sakt, berytes, gemstones and gypsium. Up North, Borno State is endowed with diatomite, clay, limestone, hydrocarbon (oil and gas), gypsium and kaolin. All these are resources that could be tapped for the development of the state without undue reliance on the federal government.

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