Fiscal Crisis Looming as States Spend 130% of IGR on Wage Bills
Many states, including Kano, Imo, Adamawa, and Taraba, are facing a fiscal crisis as they allocate about 40% of their revenue to pay personnel costs, leading to concerns about unsustainable financial practices. Data from BudgIt reveals that last year, the 36 states spent a total of N1.94 trillion on wages, exceeding their IGRs by 108%.
Despite efforts to increase revenue generation, most states struggle to meet their targets, with only 14 states scoring 30% or higher on the sustainability index. The proposed increase in the minimum wage poses a further challenge, potentially forcing states to reduce payrolls by up to 50% or face default. Economic experts warn that a significant wage increase could fuel inflation and hinder economic growth.
To avoid insolvency, Professor Godwin Owoh suggests that governors should engage in revenue-generating activities and reduce reliance on federal allocations. While domestic debt levels have decreased recently, undisclosed borrowings and outstanding obligations continue to weigh heavily on state finances, highlighting the urgent need for financial reforms.