Implementation of the new national minimum wage could widen the 2019 budget deficit, Guaranty Trust Bank (GTBank) has said.
Following the National Council of State’s endorsement of government’s proposal that the minimum wage should be increased to N27,000 from N18,000, President Muhammadu Buhari had submitted an executive bill to the National Assembly seeking the lawmakers’ consent to the new minimum wage.
However, the House of Representatives approved N30,000 as the new national minimum wage in consonance with the resolution by the tripartite committee set up on the issue by the President.
In its 2019 economic outlook report entitled: “Nigeria Macro-Economic and Banking Sector Themes for 2019,” GTBank said that the impending pay hike may lead to government expenditure rising above what was projected in this year’s budget thereby widening the deficit.
As the Tier 1 lender put it: “Given the recent fall in crude oil prices, and the noted challenges around the effectiveness of the government revenue machinery, we are concerned about the downside risks to a higher deficit. With the recent commitment to Nigerian Labour Congress (NLC) to implement the new minimum wage structure in 2019, there is a higher chance that government expenditure could rise above the projected level, thus widening the deficit.”
According to details of the 2019 budget presented to the National Assembly by President Buhari, a total expenditure of N8.83 trillion is estimated for this year. The President also stated that the budget deficit is projected to decrease to N1.86 trillion (or 1.3% of GDP) in 2019 from N1.95 trillion projected for 2018.
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