The International Monetary Fund (IMF) has disclosed that the Federal Government may need to raise a supplementary budget to accommodate the proposed minimum wage increase for Nigerian workers.
According to the international lender, this has become necessary as the negotiated amount may surpass the budgeted amount in the original 2024 budget.
This was contained in IMF’s 2024 Article IV Consultation report recently released..
The new minimum wage has been an ongoing matter between Organised Labour and the government since the beginning of this year to cushion the impacts of the harsh economy.
Recent reforms in Nigeria including the removal of fuel subsidy and the unification of the foreign exchange market have pushed the cost of living to newer levels.
While labour leaders demand N615,000 from N30,000 as salaries for lowest ranked workers, there are indications the tripartite committee may recommend N70,000 as the new minimum wage.
Reacting to this, IMF said “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.
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In the 2024 budget, the government allocated N6.48tn for personnel costs but the international lender posits that the amount may be insufficient.
It also noted that the government might need to raise the domestic and external borrowing ceilings to prevent fresh borrowings from the Central Bank Of Nigeria’s Ways and Means.
It said, “Based on staff’s projections, the authorities must raise the domestic and external borrowing ceilings to prevent renewed recourse to CBN financing. With higher interest rates, banks and nonbanks should have sufficient appetite—as indicated by market sources—conditional on careful management of system liquidity, including a likely reduction in the currently high cash reserve requirement.
“Staff projects that the government’s 2024 net financing needs can be met from the market and external borrowing. Domestic market financing needs to increase by 1.5 per cent of GDP over 2023. In addition, the government wants to retire outstanding ways and means borrowing from the CBN of 2.5 per cent of GDP through the issuance of further domestic securities.
It added, “While staff agrees that ways and means financing should be brought to zero by end-2024 in line with the law, the authorities may need to consider other options to avoid crowding out private sector credit, including drawing down the government’s deposits at the CBN built up in 2023 or a second securitisation operation to tackle this legacy problem.
“While external financing is costlier than when Nigeria last accessed Eurobond markets, staff supports an opportunistic issuance, also given upcoming maturities in 2025. A Eurobond issuance and some official financing are factored into staff’s projections as an integral part of the 2024 financing mix.”
By: Babajide Okeowo
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