The Federal Government might need to raise a supplementary budget to accommodate the proposed minimum wage increase for workers.
This need arises because the negotiated amount may exceed the allocation in the original 2024 budget, as highlighted by the International Monetary Fund (IMF) in its latest staff country report for Nigeria.
“The authorities noted that a supplementary budget may be needed to accommodate the outcome of the ongoing wage structure negotiations which may exceed what they had included in the 2024 budget,” the report stated.
Additionally, the government might need to increase the domestic and external borrowing ceilings to avoid fresh borrowings from the Central Bank of Nigeria’s (CBN) Ways and Means.
This proposed new minimum wage has been a contentious issue between Organised Labour and the government since the beginning of the year, aimed at mitigating the impacts of the harsh economy.
Reforms such as the removal of the fuel subsidy and the unification of the foreign exchange market have significantly increased the cost of living.
Labour leaders have demanded an increase in the minimum wage to N615,000 from N30,000 for the lowest-ranked workers, while the tripartite committee may recommend N70,000 as the new minimum wage.
In the 2024 budget, the government allocated N6.48 trillion for personnel costs.
However, the IMF suggests this may be insufficient, noting that the budget deficit for 2024 is expected to exceed projections due to implicit subsidies for fuel and electricity, alongside rising interest expenses on debt.
The Minister of Finance, Wale Edun, had stated the government’s intention to reduce the budget deficit from 6.1 percent in the 2023 budget to 3.8 percent in the current appropriation.
However, the IMF projects a higher fiscal deficit than anticipated in the 2024 budget, driven by lower oil/gas revenue projections, higher implicit fuel and electricity subsidies, suspension of excise measures, and higher interest costs.
The IMF report states, “Staff projects a higher fiscal deficit than anticipated in the 2024 budget, but broadly unchanged from 2023. For the consolidated government, this implies a projected deficit of 4.7 percent of GDP in 2024—compared to 4.8 percent of GDP in 2023—appropriate given the large social needs and factoring in a realistic pace of revenue mobilization.”
To meet financing needs, the report urges the government to consider market and external borrowing. It states, “Based on staff’s projections, the authorities must raise the domestic and external borrowing ceilings to prevent renewed recourse to CBN financing.
Staff projects that the government’s 2024 net financing needs can be met from the market and external borrowing.”
The report supports an opportunistic Eurobond issuance and other official financing as part of the 2024 financing mix, highlighting the importance of avoiding the crowding out of private sector credit and managing system liquidity effectively.
