The Minimum Ask: On wages, payrolls and the question nobody wants to answer first

The Desk — Finance, Policy & the View from the Street By Kemi Adeosun

I am writing this on May Day. Across state capitals, workers are gathering, marching, and listening to speeches. The ₦70,000 minimum wage that President Tinubu enacted in July 2024 remains unimplemented in enough states to constitute a pattern rather than an exception. Labour is now demanding ₦154,000 — a 120 per cent uplift — to chase what inflation has consumed.

The frustration is real. The demand is legitimate. And the politics are, as always, completely separable from the economics. So let me offer the economics, from the inside.

What Christmas Rice Taught Me About State Payrolls

There is a tradition in Nigerian government that I first encountered as Commissioner for Finance in Ogun State, and again at the federal level. At Christmas, government distributes rice to its workers. It is a gesture that dates from an era of genuine goodwill. But the administrative exercise it requires is quietly revealing.

You have to know, precisely, how many staff you have. Names, grades, stations, entitlements. For a Ministry of Finance — the ministry that is supposed to know everything — this turns out to be an annual exercise in discovery.

The rice list was, in practice, the most accurate headcount we had. The number, when it arrived, blew me away. My case to the committed senior people doing the work was that at most fifty people work in Finance in any strict operational sense. The number on the list was closer to 445. That difference was instructive: workers physically present in the building, seated at desks with little to do, drivers employed long after official cars had been abolished, three bored secretaries whilst I was typing on my laptop.

I do not say this with contempt. I say it with the clarity that comes from having had to account for where the money goes. The Nigerian public service is, in significant part, a social support system. It provides income to millions of households that would otherwise have none. It provides status, structure, and often the only formal employment a family has seen in a generation. The honest name for this is not inefficiency. It is welfare — dispersed through a payroll and therefore invisible in every policy conversation about reform.

The problem is that alongside this structural welfare function sit genuinely critical services: nurses, teachers, engineers, social workers. And the payroll that funds the redundant driver also underfunds them.

When 80 Per Cent Is Already Spent

What most Commissioners for Finance know is that when the FAAC allocation arrives each month — the federation’s shared revenue distributed to states — up to 80 per cent of it is already spoken for. Salaries. Pensions. The recurrent obligations of a workforce built up over political cycles that rewarded payroll expansion and never had to face its long-term cost.

The remaining 20 per cent is what we had to work with. Road repairs. School maintenance. Hospital supplies. Capital projects.

The orthodox answer to this bind is Internally Generated Revenue — the taxes, levies, and fees that states collect independently of the federal pool. IGR is real money, and the states that have grown it seriously, Lagos is the poster child but there are other stars in the space, whose IGR exceeds Federal Allocation. But here is the structural irony: the engine of IGR is the private sector, which is driven by SMEs. The small manufacturer, the trader, the service business, enterprises that, taken together, account for roughly 80 per cent of national employment. Make them unviable and the IGR base contracts. IGR growth and SME health are not separate conversations. They are the same conversation.

When 80 per cent of FAAC is salaries, you are not running a government. You are running a payroll with a government attached. The 20 per cent that remains is not a budget. It is an apology — and no IGR programme can compensate for a payroll that was never designed to be sustainable.

That is the context in which the minimum wage conversation takes place. And it is the context the conversation almost never acknowledges.

The Centralised Minimum Wage and the States That Cannot Afford It

Nigeria’s minimum wage is set nationally. One number, determined at the federal level, applied — in principle — to every employer across thirty-six states and the FCT, regardless of fiscal capacity, their cost of living, or the size of the payroll they are already carrying.

When a state has 80 per cent of its FAAC allocation committed before the month begins, a legislated wage increase is not a cost it can absorb. It is a mandatory increase in the single largest line item in its budget. Every naira added to the minimum wage multiplies across a payroll structured decades ago and not reformed. That dead weight of structural over-employment receives the pay rise alongside the teacher who deserves it.

The perverse result is that the states most likely to resist implementation are not always the most callous. Some are the most fiscally trapped. They understand, in a way a national negotiation cannot fully accommodate, that implementation would consume the 20 per cent currently keeping the lights on — or require borrowing against future FAAC, which several states are already doing.

This is not an argument against paying workers more. It is an argument that you cannot answer how much until you ask how many.

What the Monthly Floor Does to the SME

Since founding Nidacity, I have become, by design, a champion of the small and medium enterprise. The data insist on it: SMEs account for roughly 80 per cent of Nigeria’s jobs. Whatever we say we believe about employment, poverty reduction, or economic dignity, we are really talking about SMEs. And the minimum wage architecture, as currently designed, is doing them quiet but systematic damage.

Consider the owner of a small fashion brand. She needs three staff for a retail operation: someone to open in the morning, someone to cover evenings and someone extra on Saturdays. In the United Kingdom, she hires three people at the hourly minimum wage and pays for the hours they work. The legal minimum is her floor; the actual cost is determined by hours worked.

In Nigeria, the ₦70,000 monthly minimum is not a floor per hour. It is a floor per person per month, regardless of hours worked. Our business owner faces a binary choice: hire full-time staff she cannot fully utilise and pay each ₦70,000 regardless, or hire nobody and manage alone. The part-time option — the gateway employment that gives a young person their first formal job, their first tax record, their first entry into the documented economy — does not exist.

The 3,000 applications I wrote about in an earlier edition were not from people who lacked ability. They were from people the formal labour market had no mechanism to absorb at a price a small business could sustain. A monthly minimum wage with no hourly equivalent is one of the mechanisms that keeps that door locked — and every informal job that results is a job that pays no PAYE, generates no pension contribution, and adds nothing to the IGR base that states are depending on to grow.

The Trap, and What It Would Take to Leave It

The trap works as follows. The public payroll is too large and too opaque to reform politically, because too many households depend on it. Because it cannot be reformed, it consumes the fiscal space that would fund services. Because services are underfunded, the public sector cannot demonstrate the productivity that would justify higher wages for its genuine workers. And so in political season, the payroll expands again.

This is not a failure of character. It is a failure of structure. The incentives are misaligned at every point. A Governor who prunes the payroll loses political allies. A Federal Government that conditions wage legislation on payroll reform takes on a battle across thirty-six states simultaneously. A labour union that accepts differentiated wage floors by state capacity sets a precedent that could be weaponised in future negotiations. Nobody has an incentive to go first.

And yet somebody must. Because the current system delivers low wages for everybody, spread across a payroll that includes too many people who should not be there, serviced by a budget with no room to pay the people who should be there what they are really worth. The nurse who shows up, the engineer who delivers, the teacher whose students pass — all compressed into the same pay structure as the person posted to the office fifteen years ago and never meaningfully deployed since.

What Reform Could Actually Look Like

An hourly minimum wage — or a legally recognised part-time framework with a transparent hourly floor derived from the monthly figure — would open the labour market in ways that no upward revision from ₦70,000 to ₦154,000 achieves on its own. It would allow small businesses to create the entry-level, flexible roles that are the first rung of formal employment for millions of young Nigerians. And crucially, it would bring more workers into the formal economy — expanding the tax base that states need to reduce their dependence on FAAC in the first place.

A differentiated minimum wage is also worth a serious conversation — not as a mechanism for paying workers less, but as a recognition that a uniform national floor applied to radically different fiscal capacities is not egalitarian. It is a mechanism for ensuring the weakest states either break their budgets or break the law. Neither outcome serves the worker it was designed to protect.

That is the conversation May Day 2026 should be having. Not just what the number should be, but what the architecture of the wage should look like — and whether the payroll it sits on is honest enough to deliver it.

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Kemi Adeosun is a former Minister of Finance of the Federal Republic of Nigeria and former Commissioner for Finance of Ogun State. She is the founder of Nidacity.com. She writes from Lagos.

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