On Thursday, the federal government announced that a new minimum wage policy will take effect on April 1, 2024. According to Idris Mohammed, Minister of Information and National Orientation, the existing N30,000 minimum salary would disappear by the end of March 2024.
Mohammed made this statement on Thursday, the same day that our reporters examined the Fiscal Framework budgets for 2024–2026 and found that the Federal Government will spend N24.66 trillion on wages in 2024, 2025, and 2026.
President Bola Tinubu eliminated the gasoline subsidy on May 29, 2023, and the Federal Government promised to compensate each employee with N35,000 to lessen the impact of the loss of the subsidy. However, organized labor said that the N35,000 salary award was only a stopgap, adding that the minimum wage should be reviewed in 2024.
The Federal Government’s team and the Joint National Public Service Negotiating Council on October 18, 2019, agreed on the implementation of the N30,00 minimum wage after months of negotiations.
However, Labour unions on Thursday confirmed that they had started a negotiation process with the Federal Government, adding that based on the country’s labour law, the minimum wage should be reviewed every five years.
The Nigeria Labour Congress National President, Joe Ajaero, recently said, “It is open knowledge that the review of the national minimum wage is a matter of the law which is expected to happen in 2024.”
On his part, the Minister of Information and National Orientation, Mohammed,said that the improved take-home pay was meant to replace the temporary palliative measure put in place by the government to ameliorate the hardship caused by the fuel subsidy removal.
He said, “Certainly, there is a new wage regime that will come in on April 1, 2024. That is why these palliatives were targeted so they would cushion economic hardship before then. In our negotiation with Labour, we said that the wage issue was not something one could just fix. A committee that will also involve Labour itself will work on it.
“The committee is being constituted and we are talking to Labour about it. And by the time this current wage regime expires by the end of March, we will expect that a new wage will begin by April. It is in this wage regime that we will now have a proper salary structure for workers across the length and breadth of Nigeria. We expect that the private sector and state governors will also do the same.”
As the organised Labour demands a new minimum wage, an analysis of the 2024 –2026 Fiscal Framework shows that the Federal Government intends to spend 29.18 per cent of its total budgets for 2024, 2025, and 2026 on salaries, overheads, and pensions.
The total amount budgeted for these three items amounts to N24.66tn; 29.18 per cent of the N84.50tn budgeted for the three years. With anticipated salary increases from 2024 amid worsening economic conditions, personnel costs, and the two others are expected to jump by 8.51 per cent from the amount (N7.36tn) budget in 2023 to N7.99tn in 2024.
It is then expected to rise by 2.41 per cent to N8.18tn in 2025, and then by 3.77 per cent to N8.49tn in 2026. The amount pales when compared to the N23.37tn (27.65 per cent of its total budget) the government intends to spend on capital expenditure in the period under review.
This signifies the continuation of a culture of high overheads at the expense of high fiscal deficits. As of the end of September 2023, the Federal Government had devoted 29.76 per cent (N3.78tn) of its total spending (N12.7tn) on salaries.
The amount spent on salaries is 157.14 per cent more than the N1.47tn that has been spent on capital allocations for the year. The government said, “The actual spending was N12.7tn. Of this amount, N5.79tn was for debt service, and N3.78tn for personnel costs, including pensions.
“Only about N1.47tn (25 per cent of the pro-rata budget) has been released for MDAs’ capital expenditure as of September 2023.”
The Federal Government has about N1.5 million workers and it will review minimum wage by 2024. There are concerns that the government is operating a bloated civil service with many agencies with overlapping functions. This has led to calls for agency mergers and scrapping, where they might apply.
With salaries weighing heavily on its spending, the government, in its 2024 – 2026 fiscal framework, said, “The budget deficit is projected to be N9.18tn in 2024, i.e., N4.6tn down from N11.60tn budgeted in 2023.
“The proposed deficit represents about 50 per cent of total Federal Government’s revenues and 3.88 per cent of the estimated GDP (Gross Domestic Product ). The high projected level of fiscal deficit in 2024 is partly attributable to the proposed salary review of Federal workers across board, increased pension obligations, and higher debt service cost.
“At 3.88 per cent, the projected level of deficit is higher than the three per cent threshold stipulated in the Fiscal Responsibility Act (FRA), 2007, but significantly lower than the 2023 level of 6.11 per cent; FRA 2007, however, allows the government to exceed the 3 per cent threshold if justified by threats to national security.”
The fiscal deficit for the three years under review is expected to total N30.89tn. In June 2023, the World Bank disclosed that the Federal Government’s spending on personnel costs and debt servicing exceeded total revenues in 2022.
According to the Washington-based bank, this was the first time the Federal Government’s personnel costs and debt servicing surpassed its total revenue. It noted that the government is spending a lot on these costs, leaving little room for capital expenditure.
It declared, “Overall, the rigidity of expenditure has increased, squeezing fiscal space for the discretionary spending needed to meet development objectives.
Personnel costs and interest payments comprise a growing share of total general government expenditures (59 per cent in 2022) and for the first time in 2022 exceeded total government revenues (102 percent).”
Rising personnel cost is leaving little room for investments in infrastructure and in his budget presentation speech, President Bola Tinubu disclosed that the government would leverage the private sector to plug its capital expenditure spending holes.
He said, “In view of the limited resources available through the federal budget, we are also exploring Public Private Partnership arrangements to finance critical infrastructure.
“We, therefore, invite the private sector to partner with us to ensure that our fiscal, trade, and monetary policies, as well as our developmental programmes and projects, succeed in unlocking the latent potential of our people and other natural endowments, in line with our national aspirations.”
