Budget Woes: 24 States Depend On Federal Allocation For Salary Payments

At least 24 states across Nigeria are poised to face challenges in meeting their payroll obligations this year, relying heavily on federal allocations due to insufficient internal revenue. An examination of the approved budgets for the 2024 fiscal year indicates that only 11 out of the 36 states possess the financial autonomy to independently cover their employees’ salaries………CONTINUE READING

States such as Lagos, Kano, Anambra, Edo, Enugu, Imo, Kaduna, Kwara, Osun, Ogun, and Zamfara exhibit robust internal revenue streams, as highlighted in the budgets available on the Open States platform, supported by BudgIT. Notably, Rivers State’s budget was not accessible on the platform at the time of the analysis.

The remaining 24 states, including Bayelsa, Ondo, Yobe, Sokoto, Taraba, Plateau, Oyo, Niger, Nasarawa, Kogi, Kebbi, Katsina, Jigawa, Gombe, Ekiti, Ebonyi, Borno, Benue, Bauchi, Adamawa, Akwa-Ibom, Cross River, Abia, and Delta, are projected to fall short in funding salary payments solely from their Internally Generated Revenue (IGR). This raises concerns about the efficacy of these states in revenue generation and the potential impact on workers’ productivity.

This situation unfolds against the backdrop of escalating demands for wage increases by labor unions at both federal and state levels. The call for higher wages stems from the rising cost of living following the removal of fuel subsidies and the unification of the foreign exchange markets by the current administration. The Nigerian Labour Congress has consistently advocated for a new minimum wage of N1 million for workers if inflation continues to rise, a demand rejected by the government.

In the first half of 2023, state governments resorted to borrowing approximately N46.17 billion from three banks – Access Bank Plc, Fidelity Bank, and Zenith Bank Plc – to meet salary obligations between January and June 2023. Access Bank recorded the highest loan amount at N42.97 billion, followed by Zenith Bank (N1.78 billion) and Fidelity Bank (N1.42 billion). Despite the boost in FAAC allocations to state governments in 2023, with the highest figures in at least seven years, 32 states are still planning to borrow a total of N2.78 trillion from domestic and external sources to fund their 2024 budgets.

While some state governors argue that the removal of fuel subsidies has improved their financial situation, the need for additional funds remains evident. Further analysis of state budgets reveals that the 24 states facing financial challenges will spend N1.48 trillion on salaries in 2024, with a projected IGR of N914 billion. This implies a shortfall of N566 billion, which will need to be sourced from federal allocations or additional borrowing to meet salary commitments.

The specific funding gaps vary among states, such as Bayelsa, Ondo, Yobe, Sokoto, Taraba, Plateau, Oyo, and others, indicating a pressing need for strategic financial management and revenue generation reforms at the state level.

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