The Federal Government might have to consider increasing a supplementary budget to account for the suggested rise in the minimum wage for workers. This adjustment could be necessary because the negotiated amount might exceed the budgeted figure in the original 2024 budget.
This advice was given by the International Monetary Fund in its most recent staff country report for Nigeria.
In the report, it was mentioned that a supplementary budget might be required to accommodate the potential outcome of the ongoing wage negotiations, which could surpass what was initially planned in the 2024 budget.
It was also pointed out that the government may have to raise the limits on domestic and external borrowing to avoid resorting to additional borrowings from the apex bank’s Ways and Means.
The proposed new minimum wage has been a continuous topic of discussion between Organised Labour and the government since the start of this year, aiming to mitigate the effects of the challenging economic situation.
Various reforms in Nigeria, such as the elimination of fuel subsidies and the streamlining of the foreign exchange market, have led to increased living costs.
While labor unions are requesting an increase in the lowest-ranked workers’ salaries from N30,000 to N615,000, there are indications that the tripartite committee might recommend N70,000 as the new minimum wage. In the 2024 budget, the government allocated N6.48 trillion for personnel costs, but the international financial institution suggests that this amount may not be sufficient.
The IMF also highlighted that the country’s budget deficit for 2024 is anticipated to exceed projections due to implicit subsidies for fuel and electricity, as well as rising interest expenses on debt.
Additionally, the report mentioned Nigeria’s economy is expected to drop to the fourth-largest in Africa, as forecasted by the IMF.
Finance Minister Wale Edun stated the government’s plan to reduce the budget deficit from 6.1 percent in 2023 to 3.8 percent in the current fiscal year.
The report forecasts a higher fiscal deficit than initially projected in the 2024 budget, mainly due to lower oil and gas revenue projections, increased implicit fuel and electricity subsidies, and higher interest costs. The report also recommends that the government consider fulfilling its financing needs through the market and external borrowing to avoid relying on the Central Bank’s financing.
Amadi Vincent.
