The Federal Government is contemplating a supplementary budget to accommodate a proposed increase in the minimum wage, as ongoing negotiations are likely to exceed the allocations in the 2024 fiscal plan, according to the International Monetary Fund (IMF).
In its latest staff country report on Nigeria, the IMF mentioned, “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.”
Naija News reports that the adjustment is crucial as the government is also considering raising domestic and external borrowing ceilings to avoid new borrowings from the Central Bank of Nigeria’s Ways and Means facility.
Negotiations for the new minimum wage have been central to discussions between Organized Labour and the government.
These discussions aim to ease the economic burdens faced by workers due to recent policy changes, such as the removal of fuel subsidies and the unification of the foreign exchange markets, which have pushed the cost of living higher.
Labour leaders have demanded a substantial increase in the minimum wage for the lowest-ranked workers from N30,000 to N615,000, although there are indications that the tripartite committee might settle for N70,000.
In the 2024 budget, the government initially allocated N6.48 trillion for personnel costs. However, this figure may fall short of the requirements due to the new wage structure.
The IMF warns that Nigeria’s budget deficit for 2024 is expected to exceed initial estimates, driven by implicit subsidies and rising debt interest expenses.
“The drivers are lower oil/gas revenue projections, reflecting IMF oil price forecasts but incorporating recent production gains; higher implicit fuel and electricity subsidies; continued suspension of excise measures included in the MTEF; and higher interest costs,” the report elaborates.
Finance Minister, Wale Edun, had aimed to reduce the budget deficit from 6.1% in 2023 to 3.8% in 2024. Nonetheless, the IMF projects a larger deficit, advising, “Based on staff’s projections, the authorities must raise the domestic and external borrowing ceilings to prevent renewed recourse to CBN financing.”
The report also supports an “opportunistic issuance” of Eurobonds and possible official financing as integral parts of the 2024 financing mix, amidst the financial adjustments required to stabilize Nigeria’s economy and address the extensive social needs of its population.