IMF: FG Might Need Supplementary Budget for Minimum Wage Payments

The International Monetary Fund (IMF) has recommended that the Federal Government of Nigeria consider raising a supplementary budget to accommodate the proposed increase in the minimum wage for workers.

This suggestion comes in light of ongoing negotiations between Organised Labour and the government regarding the minimum wage, which may surpass the budgeted amount in the original 2024 budget.

The IMF’s staff country report for Nigeria also suggests that the government may need to raise the domestic and external borrowing ceilings to avoid resorting to fresh borrowings from the Central Bank of Nigeria’s Ways and Means.

Recent reforms in Nigeria, such as the removal of fuel subsidy and the unification of the foreign exchange market, have contributed to an increase in the cost of living, prompting demands for higher wages from labour leaders. While the proposed new minimum wage is still under negotiation, there are indications that the tripartite committee may recommend a significant increase from the current minimum wage of N30,000.

In the 2024 budget, the government allocated N6.48 trillion for personnel costs, but the IMF suggests that this amount may be insufficient to cover the proposed wage increase.

Additionally, the IMF projects that the country’s budget deficit for 2024 will exceed projections due to implicit subsidies for fuel and electricity, alongside rising interest expenses on debt. The Minister of Finance, Wale Edun, had previously stated the government’s intention to reduce the budget deficit from 6.1 per cent in the 2023 budget to 3.8 per cent in the current appropriation.

The IMF report also advises the government to meet its financing needs from the market and external borrowing, considering the projected deficit and rising interest costs. It suggests increasing domestic market financing and retiring outstanding Ways and Means borrowing from the CBN through the issuance of domestic securities. Additionally, the report recommends opportunistic issuance of Eurobonds, given upcoming maturities in 2025, as part of the financing mix for 2024.