IMF warns that Nigeria may need supplementary budget to fund new minimum wage

INTERNATIONAL Monetary Fund (IMF) officials have warned that Nigeria's federal government may need to raise a supplementary budget to accommodate the new minimum wage increase for workers due to come into effect soon.

At the moment, labour unions and government ministers are locked in intense negotiations over a new minimum wage as the current N30,000 per month is totally untenable.  Unions had originally demanded N1m a month but it unlikely that they will get that amount, however, whatever is agreed on will require significant government funding.

Now, IMF officials have warned that the negotiated figure may surpass the budgeted amount in the original 2024 budget. In its recent Nigeria country report, the 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”

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. 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 dangerous levels, forcing the need for a new minimum wage.

While labour leaders have recently settled for N615,000 for lowest ranked workers, there are indications the tripartite committee set up by the government may recommend N70,000 as the new minimum wage. In the 2024 budget, the federal government allocated N6.48tn for personnel costs but the IMF posits that the amount may be insufficient.

Also, the IMF further noted that Nigeria's budget deficit for 2024 is expected to surpass projections, owing to implicit subsidies for fuel and electricity, alongside rising interest expenses on debt. Finance minister Wale Edun, recently stated that the government planned to reduce the budget deficit from 6.1% in the 2023 budget to 3.8% in the current appropriation year.