Chinese loans constitute only 3.9% of Nigeria’s total public debt stock – DMO

Chinese loans constitute only 3.9% of Nigeria’s total public debt stock – DMO

Abuja – Total loans by the Chinese government and affiliate agencies to Nigeria is about $3.121 billion and constitutes only about 3.94 per cent of Nigeria’s total public debt of $79.3 billion as of March 31, the Debt Management Office (DMO) has said.

Also, in terms of external sources of funds, Chinese loans account for about 11.28 per cent of the country’s external debt stock of $27.67 billion by the same date.

The DMO said the clarification was necessary to show that China is not a major source of funding for the Nigerian government, contrary to recent reports by certain persons, including members of the National Assembly that Nigeria has mortgaged its sovereignty to China through loans.

Recently, the House of Representatives constituted an investigative committee to review all extant China-Nigeria loan agreements since 2000 to ascertain their viability, regularise and renegotiate them.

The lawmakers said despite being the arm of government responsible for appropriation, the National Assembly was in the dark on how most of the Chinese loans were collected and utilised by the government.

Noting alleged fraudulent, irregular and underhand characteristics of many Chinese loan contracts with African States, the lawmakers expressed concern that the loans have become a new form of economic colonialism by China.

They alleged that China has since emerged Nigeria’s major creditor under various bilateral deals with the Nigerian government, with the EXIM Bank of China becoming Nigeria’s biggest bilateral creditor since 2002.

China-Nigeria Loans

However, apart from China not being the major source of funding for the Nigerian government, the DMO said most of the loans come at concessional terms, with interest rates of 2.50 per cent per annum, 20 years tenor and seven years repayment moratorium period.

The Director-General of the DMO, Patience Oniha, in a statement Wednesday, said these terms are compliant with the provisions of Section 41(1a) of the Fiscal Responsibility Act, 2007 backed by the country’s Constitution.

Mrs Oniha said the low interest rate in the Chinese loans reduces the interest cost to the government, while the long tenor enables the repayment of the principal sum of the Loans over many years.

“These two benefits make the provisions for Debt Service in the Annual Budget lower than they would otherwise have been if the loans were on commercial terms,” Mrs Oniha said.

The DMO Chief said all the Chinese loans as at March 31, 2020 are tied to 11 specific projects, namely the Nigerian Railway Modernisation Project (Idu-Kaduna section), Abuja Light Rail Project, and Nigerian Four Airport Terminals Expansion Projects (Abuja, Kano, Lagos and Port Harcourt).

Other projects are the Nigerian Railway Modernisation Project (Lagos-Ibadan section) and Rehabilitation and Upgrading of Abuja- Keffi- Makurdi Road Project.

Arguing that the impact of these loans is evident, Mrs Oniha cited the example of the Idu-Kaduna Rail Line, which has become a major source of transportation for Nigerians travelling between Abuja and Kaduna.

Also, she said the new international airport in Abuja has improved air transportation, while the Lagos-Ibadan rail line when completed, would significantly ease traffic on the busy Lagos -Ibadan Expressway.

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