Nigeria’s rising debt profile, which currently stands at $37.9 billion and includes a huge sum borrowed from China, has become a serious reason for concern to Nigerians in recent times.
The concern was heightened by the news that the Chinese Exim Bank has sequestrated Uganda’s lone international airport last month because the East African country couldn’t repay its loan to China.
According to the Debt Management Office (DMO), Nigeria’s debt to China is currently $3.59 billion as of September 2021. This balance is out of a total debt of $6.5 billion available for Nigeria to draw down.
The federal government of Nigeria is struggling with debt repayment amidst revenue shortfalls orchestrated by oil market downturn. The deadlines for China’s debt repayments, which coincides with other loans, are closing in. Most of the debts have 20-year timeline with a grace period of seven years.
China’s growing legacy in Africa is characterized by lower-interest but collateralized loans channeled to infrastructure. And Nigeria, Africa’s largest economy, has in the past decade, increased its share of the loans. Though interest rates for the loans average 2.5% per annum, it has been accompanied by more controversies than infrastructure.
The Nigerian government said the loans are mostly tied to rail and road infrastructural projects. The 11 projects listed by the government in March, some of which have been completed are, Nigerian Railway Modernization Project (Idu-Kaduna section), Abuja Light Rail Project, Nigerian Four Airport Terminals Expansion Project (Abuja, Kano, Lagos and Port Harcourt), Nigerian Railway Modernization Project (Lagos-Ibadan section), and Rehabilitation and Upgrading of Abuja-Keffi- Makurdi Road Project.
The growing fear is that China could swoop on any of the assets upon default, given Nigeria’s wretched state of economy that has increased its borrowing spree.
But allaying this fear, the DMO said that the Nigerian government weighs all pros and cons and put them into consideration before signing for foreign loans.
Patience Oniha, the Director-General of DMO, on Saturday in Abuja said the Attorney General and Minister of Justice, takes the fundamental step to vet all loan agreements to ensure the country’s interest is protected.
“An important and extremely critical step is that the loan agreements are approved by the Federal Ministry of Justice.
“An opinion is issued by the Attorney-General of the Federation and Minister of Justice before the agreements are signed,” she said.
She explained that the deals involve rooms for resolving conflicts between loaner and loanee, and various arms of government, including the Federal Executive Council and National Assembly, are also involved to ensure that the loans were beneficial to the nation.
“The first action is that the parties should resolve it within themselves and if that fails, they go to arbitration.
“In other words, a lender, in this case, China, would not just pounce on an asset at the first sign of a dispute, including defaults,’’ she said.
In June, the DMO said that in terms of external sources of funds, loans from China accounted for 11.28% of the external debt stock of $27.67 billion.
However, Nigeria has repaid $565.23 million in principal repayments and another $477.98 million in interest. Oniha said loans from China to Nigeria, which presently stood at $3.59 billion, make up only 9.4% of the country’s total foreign debt stock of 37.9 billion dollars.
“Nigeria’s total debt stock as at September 30 was 37.9 billion dollars, this figure comprised the external debt stock of the Federal Government, 36 state governments and the Federal Capital Territory.
“But total loans from China stand at 3.59 billion dollars, which is 9.47% of the total external debt. The loans did not require any national asset as collateral; they were largely concessional,’’ she said.
While this explanation does not erase the concerns over Nigeria’s rising debt profile, it allays the fear that what happened to Uganda’s airport may happen to any of Nigeria’s major assets soon.
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