Starting April, new minimum wage kicks in, FG allocates N24tn for salaries
The Federal Government announced on Thursday that a revised minimum wage structure is set to be implemented starting April 1, 2024.
According to Idris Mohammed, the Minister of Information and National Orientation, the existing minimum wage of N30,000 will conclude by the end of March 2024.
On Thursday, Mohammed made this statement while our correspondents analyzed the 2024–2026 Fiscal Framework budgets, revealing that the Federal Government is projected to allocate N24.66tn for salaries over the years 2024, 2025, and 2026.
After President Bola Tinubu abolished the fuel subsidy on May 29, 2023, the Federal Government consented to providing a compensation of N35,000 to each of its employees to alleviate the impact of the subsidy removal.
However, organized labor maintained that the N35,000 wage increase was a provisional solution, emphasizing the necessity for a reassessment of the minimum wage in 2024.
After extensive negotiations lasting months, the Federal Government’s team and the Joint National Public Service Negotiating Council reached an agreement on October 18, 2019, to implement the N30,000 minimum wage.
On Thursday, labor unions affirmed that they had initiated negotiations with the Federal Government, asserting that, in accordance with the country’s labor law, the minimum wage should undergo a review every five years.
The President of the Nigeria Labour Congress, Joe Ajaero, recently stated, “It is widely known that the revision of the national minimum wage is a legal requirement scheduled for 2024.”
In response, the Minister of Information and National Orientation, Mohammed, informed The DWORLDGIST that the enhanced salary was intended to substitute the temporary relief measure implemented by the government to alleviate the challenges resulting from the removal of the fuel subsidy.
New Salary System
He stated, “Certainly, there is a forthcoming wage adjustment scheduled for April 1, 2024. That’s why these relief measures were specifically designed to alleviate economic challenges before that time.
In our discussions with Labor, we emphasized that addressing the wage issue requires a collaborative effort. A committee, which will include representation from Labor, will be tasked with addressing this matter.
“The formation of this committee is underway, and ongoing discussions with Labor are in progress. As the current wage structure concludes by the end of March, we anticipate the commencement of a new wage system by April.
It is within this updated wage framework that we aim to establish a comprehensive salary structure for workers nationwide. We hope that the private sector and state governors will follow suit.”
He explained, “By April 1, 2024, the existing minimum wage will come to an end. We have collectively agreed to establish a national wage negotiation committee, with representation from all relevant parties.”
N24.66tn Allocated for Remuneration
Amidst organized Labor’s call for an increased minimum wage, an examination of the 2024–2026 Fiscal Framework reveals that the Federal Government plans to allocate 29.18 percent of its total budgets for 2024, 2025, and 2026 to salaries, overheads, and pensions.
The cumulative budget for these three categories amounts to N24.66tn, representing 29.18 percent of the N84.50tn earmarked for the three-year period.
With anticipated salary hikes starting in 2024 amidst a deteriorating economic climate, personnel costs and related expenses are projected to surge by 8.51 percent from the allocated amount of N7.36tn in 2023 to N7.99tn in 2024.
This figure is then expected to rise by 2.41 percent to N8.18tn in 2025 and further by 3.77 percent to N8.49tn in 2026. However, this amount pales in comparison to the N23.37tn (27.65 percent of the total budget) earmarked for capital expenditure during the reviewed period.
This pattern indicates a continued preference for high overheads at the expense of elevated fiscal deficits. As of the end of September 2023, the Federal Government had allocated 29.76 percent (N3.78tn) of its total expenditure (N12.7tn) to salaries.
The government reported, “The actual expenditure amounted to N12.7tn. Within this total, N5.79tn was allocated for debt servicing, and N3.78tn for personnel expenses, encompassing pensions.
“Only approximately N1.47tn (25 percent of the pro-rata budget) has been disbursed for the capital expenditure of Ministries, Departments, and Agencies (MDAs) as of September 2023.”
The Federal Government, employing approximately 1.5 million workers, intends to reassess the minimum wage by 2024. Concerns have been raised about the government maintaining an inflated civil service with numerous agencies having overlapping functions. This has prompted suggestions for agency consolidation and elimination where deemed necessary.
With salaries significantly impacting its expenditures, the government, outlined in its 2024–2026 fiscal framework, stated, “The projected budget deficit for 2024 is N9.18tn, reflecting a decrease of N4.6tn from the N11.60tn budgeted in 2023.”
“The envisioned deficit constitutes approximately 50 percent of the total revenues of the Federal Government and accounts for 3.88 percent of the estimated Gross Domestic Product (GDP). The substantial anticipated fiscal deficit in 2024 is partially attributed to the proposed salary review for Federal workers across the board, heightened pension obligations, and increased debt service costs.
“At 3.88 percent, the projected deficit surpasses the three percent threshold stipulated in the Fiscal Responsibility Act (FRA) of 2007. However, it is significantly lower than the 2023 level of 6.11 percent. The FRA of 2007 permits the government to exceed the 3 percent threshold if justified by threats to national security. The cumulative fiscal deficit for the three years under examination is anticipated to reach N30.89tn. In June 2023, the World Bank revealed that the Federal Government’s spending on personnel costs and debt servicing exceeded total revenues in 2022.
According to the Washington-based institution, this marked the first instance where the Federal Government’s personnel costs and debt servicing surpassed its total revenue. It highlighted that the government’s significant allocation to these costs leaves minimal room for capital expenditure.
It stated, “Overall, the inflexibility of expenditure has risen, constraining fiscal space for the discretionary spending required to achieve development objectives. Personnel costs and interest payments constitute an expanding proportion of total general government expenditures (59 percent in 2022) and, for the first time in 2022, exceeded total government revenues (102 percent).”
The escalating personnel costs are limiting opportunities for investments in infrastructure. In his budget presentation speech, President Bola Tinubu revealed that the government plans to leverage the private sector to address gaps in its capital expenditure spending.
He expressed, “Given 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.”
Recently, the Minister of Budget and National Economic Planning, Abubakar Bagudu, acknowledged that the government is grappling with the payment of salaries due to dwindling revenue sources.”
The minister, represented by Dr. Sampson Ebimaro, the Director (International Cooperation), remarked at an event, stating, “The government is grappling with significant challenges, particularly in the current scenario of a revenue deficit. Financial resources are scarce nationwide, and the government is presently struggling to meet salary obligations.
“The growth rate is sluggish, while population growth is rapidly advancing. Unemployment is on the rise, accompanied by elevated inflation. These are critical issues that non-governmental organizations should address, assisting the government in areas where it faces limitations.”
Excessive Salary Expenses
In a related development, the House of Representatives expressed disapproval on Thursday of what it termed an excessive personnel cost in the 2024 budget.
Consequently, the House called on the Independent Corrupt Practices and Other Related Offences Commission to summon ministries, departments, and agencies to address the alleged inflated costs.
During the session, House member Sada Soli brought to the attention of his colleagues what he labeled as the ‘excessive personnel cost’ within the budget cycles of ministries, departments, and agencies.
During the House of Representatives’ debate on the general principles of the 2024 budget, Sada Soli, a representative from Katsina State, characterized the budget as ‘unique’ and drew attention to certain crucial aspects.
Soli specifically urged committee chairmen to scrutinize the excessive personnel costs of Ministries, Departments, and Agencies (MDAs), emphasizing the need for a thorough review.
He highlighted the Independent Corrupt Practices and Other Related Offences Commission’s role in summoning agencies for audits, particularly focusing on the over-bloated personnel costs. Additionally, Soli acknowledged the mention of collaboration between states and the Federal Government in the budget, emphasizing the significance of such cooperation for states to adjust their budget specifics.
Soli stressed the necessity for the National Assembly to pay attention to the procurement process, characterizing it as overly cumbersome. He also urged the Federal Government to streamline the Integrated Personnel and Payroll Information System (IPPIS).
The House initiated the debate on the N27.5tn 2024 budget on Thursday, setting the stage for its subsequent passage for a second reading.
During the debate on the general principles of the 2024 budget in the House of Representatives, House Leader Julius Ihonvbere praised the President for presenting a comprehensive budget catering to all segments of the Nigerian population.
He highlighted key principles for budget consideration, such as revenue, expenditure, past budget performance, and the global, domestic, and sub-national context.
Ihonvbere emphasized the budget’s focus on addressing fiscal challenges, insecurity, and expanding the economic space.
He particularly commended the attention given to education and the strategic deployment of resources. Security was identified as a prime area of focus, given the impact of insecurity on various aspects of daily life.
In response, Ihonvbere urged accelerated consideration of the budget proposal. Other members, including Ahmadu Jaha and Yusuf Gagdi, expressed support for the budget.
Jaha commended it as a demonstration of the President’s commitment to addressing long-standing infrastructural challenges, emphasizing the potential for economic development through diversification.
Gagdi called for robust oversight to ensure the realization of the administration’s goals. On the opposition side, Isah Ali stressed the importance of positively impacting the lives of Nigerians through the budget, emphasizing diligent scrutiny and effective implementation.
In the Senate, Senate President Godswill Akpabio announced that the appropriation bill would undergo a second reading on Friday.
The debate in the upper legislative chamber, led by Senator Opeyemi Bamidele, highlighted concerns about the budget’s high recurrent expenditure and the need to address a deficit of N9.8 trillion without shrinking the economy drastically.
Akpabio concluded by stating that the budget would pass for a second reading after contributions from other Senators.