The Federal Government may find it necessary to introduce a supplementary budget to accommodate the proposed increase in the minimum wage for workers. This move comes as negotiations suggest that the agreed-upon amount might surpass the initially budgeted sum in the 2024 budget. The International Monetary Fund (IMF) has recommended this course of action in its recent staff country report for Nigeria.
According to the report, “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.”
Furthermore, the IMF report highlights the potential need for the government to raise both domestic and external borrowing ceilings to mitigate the necessity for additional borrowings from the central bank’s Ways and Means facility.
The ongoing discussions surrounding the new minimum wage have been a focal point between Organised Labour and the government, particularly in light of economic challenges. Recent reforms, such as the removal of fuel subsidy and the unification of the foreign exchange market, have heightened the cost of living.
While labor leaders advocate for a significant increase from the current minimum wage of N30,000 to N615,000, indications suggest that the tripartite committee may recommend N70,000 as the new minimum wage.
In the 2024 budget, the government allocated N6.48tn for personnel costs. However, the IMF suggests that this allocation may fall short of the actual requirements.
Moreover, the IMF report forecasts that the country’s budget deficit for 2024 is likely to surpass projections due to implicit subsidies for fuel and electricity, alongside rising interest expenses on debt.
The Minister of Finance, Wale Edun, had previously outlined the government’s plans to reduce the budget deficit from 6.1 per cent in the 2023 budget to 3.8 per cent in the current appropriation.
Additionally, the report advises the government to consider meeting its financing needs through market borrowing and external sources. It emphasizes the importance of careful management to avoid crowding out private sector credit.
In conclusion, the IMF report underscores the importance of fiscal prudence and strategic financial management to address Nigeria’s economic challenges while ensuring sustainable growth and development.
