The International Monetary Fund has said that the Federal Government may need to raise a supplementary budget to take account of the proposed minimum wage increase for workers.
The negotiated amount may exceed the original 2024 budget’s appropriations, as a result, according to The Punch.
This is contained in the recommendations made by the Fund 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.
It added, that to prevent new borrowings from the apex bank’s Ways and Means, the government might need to raise its domestic and external borrowing ceilings.
Since the beginning of the year, the new minimum wage has been the subject of ongoing negotiations between organised labour and the government aimed at mitigating the impact of the economic downturn.
However, indications are that the tripartite committee may recommend a new minimum wage of N70,000 as opposed to salary demands from labour leaders for the lowest-paid workers amounting to N615,000 instead of N30,000.
In the 2024 budget, the government allocated N6.48tn for personnel costs but the international lender posits that the amount may be insufficient.
Meanwhile, the IMF pointed out that due to implicit subsidies for fuel and electricity as well as rising interest costs on debt, the country’s budgetary deficit in 2024 is expected to exceed projections.
The Minister of Finance, Wale Edun, had said that the government plans to reduce the deficit from 6.1 per cent in the 2023 budget to 3.8 per cent as currently allocated.
The IMF report read in part, “Staff projects a higher fiscal deficit than anticipated in the 2024 budget, but broadly unchanged from 2023. 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.
“Staff factors in an under-execution of capital expenditure in line with past outcomes and estimates an FGN deficit of 4.5 per cent of GDP relative to the 2024 budget target of 3.4 per cent of GDP. For the consolidated government, this implies a projected deficit of 4.7 per cent of GDP in 2024—compared to 4.8 per cent of GDP in 2023 measured from the financing side—which is appropriate given the large social needs and factoring in a realistic pace of revenue mobilisation.
“Over the medium-term, staff projects consolidation in the non-oil primary deficit. With rising interest costs, government debt stabilises towards the end of the projection period.”
