The International Monetary Fund (IMF) has recommended that the Nigerian government may need to raise a supplementary budget to accommodate the proposed increase in the national minimum wage for workers. According to the IMF’s latest staff country report for Nigeria, the negotiated new minimum wage amount could potentially exceed the allocation made in the original 2024 federal budget.
The report states, “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.”
Additionally, the IMF advised 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 facility.
The minimum wage issue has been an ongoing matter of negotiation between organised labour and the government since the beginning of 2024. Recent economic reforms in Nigeria, including the removal of fuel subsidies and the unification of the foreign exchange market, have led to a significant increase in the cost of living, prompting calls for higher wages.
While labour leaders have demanded a minimum wage of N615,000 from the current N30,000 for the lowest-ranked workers, indications suggest that the tripartite committee may recommend N70,000 as the new minimum wage.
In the 2024 budget, the government allocated N6.48 trillion for personnel costs. However, the IMF posits that this amount may be insufficient to accommodate the proposed wage increase.
Furthermore, the IMF noted that Nigeria’s budget deficit for 2024 is expected to surpass projections due to implicit subsidies for fuel and electricity, along with rising interest expenses on debt.
The report also urged the government to consider meeting its financing needs from the market and external borrowing sources. It stated, “Based on staff’s projections, the authorities must raise the domestic and external borrowing ceilings to prevent renewed recourse to CBN financing.”
The IMF emphasised the importance of careful management of system liquidity, including a potential reduction in the currently high cash reserve requirement, to ensure that banks and non-bank financial institutions have sufficient appetite for government securities.
While acknowledging the government’s desire to retire outstanding Ways and Means borrowing from the Central Bank of Nigeria, the IMF suggested considering alternative options, such as drawing down the government’s deposits at the CBN or a second securitization operation, to avoid crowding out private sector credit.
The report also supported an opportunistic issuance of Eurobonds, given upcoming maturities in 2025, despite the higher costs associated with external financing compared to when Nigeria last accessed Eurobond markets.