The Federal Executive Council (FEC) at its recent meeting presided over by President Muhammadu Buhari approved the supplementary budget estimate of N895.8 bn for the remaining period of 2021. According to the Minister of Finance, Budget and National Planning, the appropriation bill is specifically provided for the purchase of additional Covid-19 vaccines and military equipment.
Furthermore, she stated that the government earmarked the sum of N770.6bn for defence spending, N83.6bn in respect of vaccines, N1.7bn for the Nigeria comprehensive AIDS programme and N40bn contingency provisions to meet the needs for allowances in the health and education sectors and other wage-related issues.
In addition, the Minister highlighted that a major part of the budget estimate (N722.5bn for the capital component of security expenditure) will be financed via the domestic market while the remaining N173.3bn be sourced through World Bank existing loans and special reserve levy accounts.
In recent times, the country has faced an all-time high level of insecurity affecting economic activities and weighing heavily on domestic food production. The insecurity induced disruptions to the food supply chain have caused a significant hike in food prices across the country.
Despite the increased security votes for funding security services across states in the country, the lack of transparency in security expenditure has yielded limited results and remain riddled with controversies. Without a doubt, there is a need to tighten the country’s security situation considering current realities, which if not urgently addressed, may have devastating effects on long-term economic stability. However, we are concerned about the proper and efficient use of these funds.
The additional borrowings to fund the supplementary budget is expected to mount pressure on the country’s debt level (Q1 2021: N33.10tn) and further worsen the debt service to revenue ratio, which is currently estimated at c.70%. With 81% of the budget expected to be financed by domestic borrowing, this supports further fixed income yield accretion.
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