Nine Nigerian States Cut Wage Bills Despite Increased FAAC Allocations
Despite an increase in revenue from the Federation Account Allocation Committee (FAAC) following the removal of fuel subsidies in May 2023, no fewer than nine states in Nigeria reduced their wage bills during the first half of 2024. This finding comes from an analysis of the 2023 and 2024 budget implementation reports of 35 states, provided by Open Nigerian States, a BudgIT-supported platform for public budget data.
Increased Allocations, Reduced Wage Bills
Since the fuel subsidy was removed, government revenues across all tiers have surged. Several states experienced a 50% to 100% increase in their FAAC allocations during the first half of 2024 compared to the same period in 2023. Despite these revenue boosts, nine states—Akwa Ibom, Anambra, Bauchi, Borno, Delta, Zamfara, Oyo, Ondo, and Kano—reduced their spending on salaries and wages.
These nine states received a total of N1.54 trillion in FAAC revenue between January and June 2024, up significantly from the N838.49 billion they received during the same period in 2023. However, they collectively spent N17.06 billion less on salaries and wages in the first half of 2024 compared to 2023. Specifically, they reduced their total wage bill from N199.71 billion in 2023 to N182.65 billion in 2024, despite the substantial increase in revenue.
Largest Wage Bill Reductions by State
Oyo State recorded the most significant wage bill reduction, cutting its spending on salaries by N7.61 billion. The state spent N32.66 billion on wages in Q2 2024, down from N40.27 billion in Q2 2023. Kano State followed closely, reducing its wage bill by N3.77 billion, from N31.26 billion in 2023 to N27.49 billion in 2024.
Other states that reduced their wage bills include:
•Akwa Ibom: N471.11 million reduction
•Anambra: N47.94 million reduction
•Bauchi: N689.99 million reduction
•Borno: N415.31 million reduction
•Delta: N1.24 billion reduction
•Zamfara: N1.49 billion reduction
•Ondo: N1.33 billion reduction
Unclear Reasons for Wage Reductions
Despite the significant reductions in wage spending, there were no clear reports of worker layoffs in these states. The reasons behind the reduced wage bills remain unclear, raising questions about whether the savings were due to workforce restructuring, efficiency improvements, or other undisclosed factors.
Financial Autonomy of States
Interestingly, the analysis also revealed that only 11 out of Nigeria’s 36 states have the financial capacity to pay workers’ salaries without relying on federal allocations. These financially autonomous states include Lagos, Kano, Anambra, Edo, Enugu, Imo, Kaduna, Kwara, Osun, Ogun, and Zamfara.
This finding underscores the ongoing dependence of most Nigerian states on FAAC allocations to meet their wage obligations. Despite the increase in revenues following the fuel subsidy removal, many states still struggle with financial independence, leading to concerns about the sustainability of public finances at the subnational level.
Conclusion
While the revenue increases following the removal of fuel subsidies have boosted FAAC allocations, the decision by nine states to reduce their wage bills, even with higher income, raises questions about the financial management practices of these states. With no clear indications of layoffs or large-scale workforce reductions, the reasons behind these cost-saving measures remain speculative. Furthermore, the revelation that only 11 states can independently meet their wage obligations highlights the fiscal challenges facing most Nigerian states, which remain heavily reliant on federal allocations. The ongoing need for sustainable financial management in the face of fluctuating revenues and expenditure pressures is critical for the long-term stability of the states.
