 Welcome back. State government borrowed about 46.17 billion from three banks to pay salaries between January and June 2023. That's a quote into findings. Now these findings were based on analysis of the false half of this year. Financial statements of Axis Bank, Fidelity Bank and Zenit Bank Group revealed that. In the wake of their borrowings, how far can these state governments go about paying salaries? International Finance and Economic Analyst Muktah Mohamed joins me now to discuss further on the minimum wage salaries and of course all of the biting effects of inflation in the country. No thanks for joining me Muktah. Thank you. All right, the Federal Government on Independence Day, that's the President, you know, wrote out some messages and top top salaries for federal civil servants right now at the minimum. Not really much per se. The next is when they should be earning about $65,000. In your opinion, is it a welcome development or is just scratching the surface or we are just trying to look for temporary solutions so that the economy can keep running? What's going on Muktah? I think you said the two words altogether. Temporary, you first of all come, is it just a temporary solution then a short-term major? I think those are the two words and I think you have hit it like that. I think the federal government is looking for a temporary solution and the short-term majors by what they've just done. And we must not forget that minimum wage doesn't mean the state government will have to pay the same thing. Everybody is going to negotiate its own minimum wage. That's what the true federalism is all about because the cause of living in Abuja and Lagos or the cause of living in KB and the cause of living in Anambra state is not the same. So every state will have its own peculiarity in terms of doing its minimum wage. But what it means is that ordinarily the minimum wage, that means they should pay, should be what the federal government will pay. But again, based on those reports from those auditory results, you and I know that that means it's probably going to be very difficult because at the time they bought this money, the minimum wage was 18, I think was 18, is it 18,000? So I think there's still lots that the government will need to do to get people excited about them, especially with the current hardship. I don't think it should be a problem for states to pay this money these days because they are beginning to end move from the federation account. But they are still buying. So let me just button, sorry if you can hear me. You said you don't think it might be a problem for them to be able to pay this amount. But from reports that we got, some states actually borrowed in the past six months to pay salaries in the first half of this year. They were actually borrowing. Yes, that's what I'm saying. I think we need to look into that because most of them have received more than what they've used to receive before, up to three to four times what they used to receive before. I remember when this president came to power, the highest share in every state, between state federal government and local government ever had, they had got about 1.1 trillion. The last one was 1.1 trillion. That they were the three tiers of government share. So for me, I don't think, I think why you see, let me tell you something about the bank, we borrow you money because they know you can pay. So definitely what it means is that once this money goes into this account, they are deducted from sources and then they will crystal as long as you have the means of paying, it's not a problem. But the challenge we always have is that most of the state government, after they finish paying salaries, they are not able to do developmental projects in their state. So that for me is a major problem. And most of the state government, sometimes commercial activities, they are very low. And that means they have low internal generated revenue. It's also very low. In the only state that seems to be able to pay salaries and the internal generated revenue is here, is Lagos and River State. All of that seems to be struggling in the area of internal generated revenue. In the not the only state that I've been doing very well when it comes to internal generated revenue, also Aduna State, when the former governor, Matt Nassif Erufai, was there. So we don't know what is happening now, whether they are going to increase it or not. It's a big problem for the states. But I think they should be equal to the tax with the kind of money they are receiving from the federation accounts. Okay, I haven't said that right now. But even if we increased minimum wage to that particular month to 65, Adina's Motor Assam label is saying they had one term between the hundreds to 200,000 there. Let's compare side by side with the inflation rate of 25% right now. Would that even be realistic to still be able to get staples and for the households? Just officially 25%. Officially, we'll say that again. Officially it's 25%. Officially. When your eye go to the market or when you go and I'll show your wife telling you it's more than 25%. Let's look at that figure, 25% and then the federal government came up with a fixed rate of 25,000. If you look at that by the minimum wage, then you see there's been a little bit increment. Minimum wage was 18,000. I can't remember. Minimum wage was 30,000. So when you say that with 25,000, the government can tell you that they have increased it by almost 100% in their allowance. Let me tell you the challenge I have. Let me tell you Justin. I think labor should not go shit on structural palliative rather than incrementing salary because it's a simple analogy. Once workers start paying, when they start paying them increased salary, then the tax for government goes up. But we want to believe that this money that the federal government is planning to pay now, it called it allowance so that your allowance are not supposed to be taxed. If it is like that, then fantastic. For the next six months, I think it's a fantastic move. But if you're going to add it together and tax, then if you're not taxing, what I said labor should be looking at, I said it on your program was for labor to begin to look as structural palliative. In terms of what? Taxes? Say for the next two years, workers should not pay taxes. Tax holidays. Because when you do this structural palliative, it affects every worker. That is TUC Nigerian Labor Congress, which is generally like the government sector. Because for me, that's the major challenge we have. Because when you go to negotiate, you're only looking at the federal government workers. We're not looking at the private sector. And how many of these companies business are still stable to be able to meet the minimum wage? So if you want to do that to touch every Nigeria, then you need to look at the former sector. Most of these companies that are their employees pay taxes and also they should benefit also from it. Those are structural reform that touches everybody. And then you see the impact in the economy. But if you are negotiating now, the federal government workers can get that. The state cannot get it. It's a big challenge. Okay. So aside from the tax holidays, what about, okay fine, if you don't get to tax so much on the income of Civil 7, what about increasing taxes maybe for luxury items or maybe for VAT or something like that? How far would that go? See increase taxes on all those things. You know, they push it back to the consumer. And even their luxury items, most of the people that run companies and all these things are the ones that can bring in the luxury items. So to keep their appetite in these luxury things, then they would turn it back again to their workers. They would say, okay, you know what, because I want to live my life, I can't keep employing 10 to 15 or 20 people. I need to, because I'm being taxed in my luxury items, I need to reduce my work strength. And so they will send other workers into unemployed market. So in as much as I agree, but what I think the government have not been able to do adjusting is not be able to cash the informal sector into the tax bracket. If we are able to cash the informal sector into the tax bracket, then we would have seen the kind of revenue that we're getting. And then that will also help government to be able to fund their budgets and then state government and others will be able to get more returns from the federation. I can't be able to pay salaries. But again, for you to get the informal sector, you need to give in something to get in something. Then for that, you need to build infrastructure for them. You need to begin to see how they can begin to assess soft loom. When I talk to the informal sector, I'm talking about the guy that is driving Kekena Pep, talking about the guy that owns the Barbie Saloon. I'm talking of the Petty Trader. I'm talking of the woman that has a shop in the market. How much have you been able to generate taxes from those people? If you are able to do that, I'm telling you that you are capturing about 80% of Nigeria. And if 80% of Nigeria are capturing the tax bracket, definitely I think all these economic challenges we have been facing we could be seen like at the end of the tunnel. So when they say widening the tax bracket in government time is taxing people like me and you again. They will tax us the more. That's the only way when Nigeria governments want to widen the tax bracket. They are not thinking of what they want to widen the tax bracket to get more people into the tax net. And so that we can get more Nigerian paying taxes. And those Nigerians will begin to see what these taxes are achieving. What these taxes are doing to their economy. We have good rules. We have power. You are not providing for yourself. So you can't be taxing the woman that has it in her dressing saloon. And yet he has to go and buy food at $700 to power his territory. So why are you collecting taxes from too? So I'm saying we need to give in something and get something from them. Alright, on the final notes Mukta, my directors are asking me to run away from the yes to yes. That's on a lighter note. So having said all of that now I just want us to just talk about something as we were talking about on the show now. Vis-a-vis the issue of CNG bosses and maybe other sort of palliatives for you know for the masses that it were. We see we are yet to see these bosses and would they in any way cushion any of them this challenge that we've been hard to go through in the past five months? Yeah they will. But again we have to look, I'll see come back to the challenge. CNG boxes when the CNG bosses when they come in they drop you. If you are working, I know your office, the CNG bosses will not come and drop you at the doorstep of your office. So by the time they drop you in the bus stop how do you get, will you track from that place to your office? So if you are using that also they also have to be looking at mini means of transportation also because again the way our road networks are is not as straightforward like when you drop so few people will be able to drop them and track to their offices. So we need to look at that. I think it's a good, it will reduce the cost of transportation. It will make more people to keep their car at home and want to go but again like I said even when we are doing that they should also think about the mini transportation within the locality not just within the cities. So if the CNG bosses are there going to be those bosses, CSG bosses that will be used to carry food items from the villages to Lagos so that they will bring the cost of those food items cheaper so that we can get it cheap or it is just a means of transportation within urban cities. We need to look at the structure of what we are about to do. Alright, thank you so much Mohamed for all of the useful insight that you always profess when we talk about these economic issues. Would you appreciate all of them? Thank you Justin. Alright, and that's the size of the show for this morning. My name is Justin Akademi. Many thanks for being a part of the show. We'll return again at the same time next time. Bye for now.