From January to April, the Federal Government (FG) paid N405.93 billion in interest on ways and means. However, this expenditure was not budgeted for while preparing the initial budget for the year.
By extension, the year’s budget might have increased from N17.1 trillion to N17.5 trillion within the first four months. If this goes on, an addition of over N1 trillion might be added to the budget by the end of the year from this unbudgeted line item alone.
This detail was contained in the FG consolidated fiscal report for the year from the Office of the Accountant-General of the Federation.
A breakdown of the recurrent-debt expenditure shows that N4.749 trillion was budgeted. This comprises N3.609 trillion for total debt service with N2.206 trillion budgeted for domestic debt service and N1.103 trillion budgeted for foreign debt service) and N207.71 billion for sinking funds.
By the budget, N395.8 billion will be spent monthly on debt. N300.77 billion of both domestic and foreign debt and N22.56 on sinking funds.
This gives N1.583 billion for recurrent debt expenditure for four months. Debt service for the first four months was budgeted at N1.203 trillion; N835.36 billion for domestic debts, and N367.72 for foreign debts. N90.24 billion was budgeted for sinking funds.
Actual expenditure on recurrent debt shows that the FG spent N1.939 trillion for the first four months. N1.532 trillion was spent on debt servicing. Of this amount, N1.199 trillion was for domestic debts, while N334.24 billion was for foreign debts.
The FG didn’t spend any sinking funds in the first four months. It, however, spent N405.934 billion on a new line expenditure. This line expenditure was identified as ‘Interest on Ways and Means.’
A breakdown shows that the FG spent N114.302 billion on this line expenditure in January, N111.03 billion in February, N123.59 billion in March, and N57.02 billion in April. This gives a cumulative of N405.934 billion for the period.
Further analysis shows that recurrent debt expenditure had a N355.54 spending variance. N1.939 was spent rather than the N1.583 budgeted. This shows a 5.12% increase.
Domestic and foreign debt servicing had a periodic variance of N329.73 billion more than was budgeted. Domestic debt servicing increased by N363.21 billion while foreign debt service was short by N33.48 billion. This shows a 43.48% increase in domestic debt servicing and a 9.1% decrease in foreign debt servicing.
Sinking funds have a zero variance, thus a 100% variance payments.
However, expenditure on interest on ways and means had a -N405.934 variance. With N405.934 spent within the period, the -N405.934 variance means there was no initial budget for this expenditure on the approved budget. Thus, a line item spending on this indicates a new expenditure line generated after the budget was approved.
This means that expenditure on interest on ways and means was not budgeted for but is being made. By extension, it indicates an increase in the total expenditure for the year by the amount paid on this line item.
Thus, the recurrent debt budget for the period has increased from N1.583 trillion to N1.989 trillion. This increased the total recurrent debt expenditure from N4.749 trillion to N5.155 trillion in the first four months.
The new line item has added N405.934 billion to the overall budget of N17.1 trillion, increasing it to N17.5 trillion in just four months.
With N405.934 billion added in four months, if this figure is maintained for the next three cycles of the year, it will mean an additional N1.217 unbudgeted expenditure.
The entire budget will have an N1.217 trillion add-on, making it N18.3 trillion instead of N17.1 trillion just from the interest on ways and means. It is already clear that at least one other line item in the budget will add to the add-ons, subsidy; further burdening a budget that is heavily financed by debt.