Nigeria owes China, increasing total debt to $37.9b
By Jeph Ajobaju, Chief Copy Editor
China alone is now owed $4.15 billion by Nigeria whose debt to the Asian nation has risen 13.49 per cent from $3.59 billion in September, amid borrowings from other sources, stoking fears of debt default which causes lenders to take over assets.
Debt Management Office (DMO) Director General Patience Oniha insisted on December 18 that Nigeria has not signed any loan agreement with China that can necessitate a Beijing takeover of assets if Abuja defaults in payment.
But the explanation does not calm nerves as she also disclosed that Nigeria’s total debt in September mounted up to $37.9 billion in loans obtained by federal and state governments.
Latest DMO data shows Nigeria’s debt to China in September reached $4.15 billion out of a total debt $6.5 billion available for Nigeria to draw down.
Most of the debts are for a period of 20 years with a grace period of about seven years to repay the principal. Only a $200 million debt has a tenor of 12 years with a grace period of five years.
The loans are broken into dollar-based and Yuan based loans with $4 billion and another CNY480.
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Soaring Chinese loans
Nairametrics reports that Nigeria’s debt to China has soared over the last decade as government diversifies its debt portfolio towards cheaper but controversial Chinese loans. Interest rates for the loans average 2.5 per cent per annum.
The DMO reported in June that total loans taken by Nigeria from China as of March 31, 2020 (Q1 2020) amounted $3.121 billion, about 3.94 per cent of Nigeria’s entire public debt of $79.303 in that quarter.
China accounted for 11.28 per cent of external debt of $27.67 in Q1 2020.
Most of the loans were drawn down by Goodluck Jonathan administration with over $2.7 billion obtained out of a total $3.1 billion available. The balance $1.3 billion was collected between April 2016 and December 2019 as Nigeria stepped up borrowings.
Nigeria has paid back $565.23 million in principal repayments and another $477.98 million in interest, with $3.5 billion outstanding from loans obtained so far.
Purpose of Chinese loans
Abuja says Chinese loans are tied to projects. The projects as of Q1 2020 include
- Railway modernisation (Idu-Kaduna)
- Railway modernisation (Lagos-Ibadan)
- Abuja light rail
- Expansion of four airport terminals (Abuja, Kano, Lagos, and Port Harcourt)
- Rehabilitation and upgrading of Abuja-Keffi-Makurdi road
Oniha says China won’t take over Nigeria’s assets
Oniha told the News Agency of Nigeria (NAN) on December 18 that Nigeria does not risk losing assets to China as the loans are largely concessional without any national asset as collateral.
Her words: “Nigeria’s total debt stock as at September 30 was $37.9 billion, 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, which is 9.47 per cent of the total external debt. The loans did not require any national asset as collateral; they were largely concessional.
“Before any foreign loan is contracted, including the issuance of Eurobond, they are approved by the Federal Executive Council and thereafter, the National Assembly.
“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.
“Several measures which operate seamlessly have been put in place to ensure that data on debt are available and that debt is serviced as at when due. Provisions are made explicitly for debt service in the annual budgets.
“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.’’