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Every fiscal year comes with both new challenges and backlog from the previous fiscal year. Often, it is the ability to meet fiscal responsibilities in the capital and recurrent terms as well as coordinating a proper debt management scheme that moderates debt obligations on the future generation. That is, high debt today implies higher taxes tomorrow. This year, it is the legislation on the minimum wage and an over-hang in sub-national and national debts.
The minimum wage is a law which sets the smallest wage an employee can pay the last worker. The minimum wage is subject to periodic reviews so as to reflect the current realities in an economy. While meant to close the gap in income inequality, it is a major call for concern along a 3-dimensional issues space – government, policy and the people – for states in Nigeria. A policy on minimum wage increases the fiscal burden on government and firms, while it expands the income to the household – with the possibility of labour cuts and wage-induced inflation, however.
A number of states have revealed theirincapacity to meet the full obligations that follow the legislation on the new minimum wage of N30,000.They cite growing debt profile and non-increasing revenues as the major reasons. In 2018, the average state debt which stood at NGN138.25 billion and the average debt per capita of NGN24, 100 provide some insight on the fiscal stance across the 36 states of the federation.Ogun, Kano and Bauchi are the average states in terms of debt, while Plateau, Abia, Adamawa, Ebonyi and Ogun are the average in term of debt incidence (per capita).
Further into specific states, 9 states have debt per capita above the new minimum wage of NGN30,000 – with Lagos as the highest with NGN … Read More...