The total personnel costs allocated for salaries and allowances by state governments in Nigeria have seen a dramatic increase, rising from ₦2.036 trillion in 2024 to an estimated ₦3.87 trillion in 2025, marking a nearly 90% surge in wage expenditure.
This significant rise is largely driven by the implementation of the newly approved ₦70,000 minimum wage, as well as an increase in political appointments. Despite budgeting ₦2.8 trillion for salaries last year, states ultimately spent only ₦2.036 trillion, reflecting a shortfall of ₦764 billion, according to budget implementation reports.
States Struggle with Wage Bills
An analysis of the 2025 approved budgets for Nigeria’s 36 states reveals that at least 27 states will struggle to pay workers’ salaries without federal allocations. This highlights concerns over fiscal sustainability, as only nine states are projected to meet salary obligations independently.
The increase in personnel costs varies across states:
- Abia, Cross River, Ekiti, Niger, Rivers, and Taraba recorded payroll increases exceeding 100% compared to their 2024 budgets.
- Gombe, Osun, and Ondo saw the smallest increases, staying below 15%.
- Lagos recorded the highest absolute increase, with its personnel costs rising from ₦225.1 billion to ₦401.1 billion.
The states most reliant on internally generated revenue (IGR) and least dependent on federal allocations include Lagos, Abia, Benue, Enugu, Ogun, Niger, Kaduna, Kwara, and Osun.
Economic Implications and Expert Opinions
Economists have raised concerns about the financial sustainability of this wage increase, especially for states with low IGR. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, highlighted the disparity in economic resources among states. He noted that while coastal states like Lagos and Delta benefit from thriving businesses, landlocked states with economies driven by agriculture and small enterprises struggle with revenue generation.
Additionally, concerns about overstaffed government agencies and inefficiencies in state administrations have been raised. Many ministries reportedly employ more workers than necessary, including cases of ghost workers, adding to the financial burden.
Professor Segun Ajibola of Babcock University suggested that states need to explore more avenues to increase IGR, cut unnecessary expenses, and enhance transparency in public spending.
Labour Unions Push for Full Implementation
Despite the financial strain, the Nigerian Labour Congress (NLC) has insisted on full implementation of the ₦70,000 minimum wage, setting a December 2024 deadline for state governments. However, delays in adoption continue in many states, leaving workers uncertain about when they will receive the promised wage increase.
With the rising cost of living and economic pressures, state governments now face the challenge of balancing higher wage bills with sustainable revenue generation while ensuring that workers receive fair compensation.
