Nigeria’s debt to China reaches $4.15bn

*As DMO reacts to reports of possible takeover of national assets by China due to loan default

Latest data from the Debt Management Office reveal Nigeria’s debt to China is currently $4.1 billion as of September 2021. This balance is out of a total debt of $6.5 billion available for Nigeria to draw down.

Most of the debts are for a period of 20 years with a grace period to repay the principal of about 7 years. Only a $200 million debt had a tenor of 12 years with a grace period of 5 years. The loans are broken into dollar-based and Yuan based loans with $4 billion and another CNY480.

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 annum. Back in June, the DMO reported that the total value of loans taken by Nigeria from China as at March 31, 2020, was $3.121 billion.

 This represents only about 3.94% of Nigeria’s total public debt of $79.303 as at March 31, 2020. Similarly, in terms of external sources of funds, loans from China accounted for 11.28% of the external debt stock of $27.67 at the same date.

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Most of the loans were drawn down in the Goodluck Jonathan era with over $2.7 billion drawn out of a total principal available of $3.1 billion. The balance of $1.3 billion was drawn down between April 2016 and December 2019 as Nigeria stepped up borrowings.

Nigeria has also repaid $565.23 million in principal repayments and another $477.98 million in interest leaving an outstanding $3.5 billion to pay from what has been drawn so far.

According to the government, Chinese loans are project-tied loans. Some of these 11 projects as at March 31, 2020, 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 Debt Management Office (DMO) has insisted that Nigeria did not and will never mortgage its national assets to China as Chinese loans to Nigeria.

The clarification from the DMO follows reports that the federal government risks losing key national assets to China in the event of default in paying back loans gotten from China.

According to NAN, this was made known by the Director-General of DMO, Patience Oniha, during an interview on Saturday in Abuja.

Oniha during the interview clarified that the loans were largely concessional, as no national asset was tagged as collateral. She said, “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 stands at 3.59 billion dollars, 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.’’

Oniha urged Nigerians to always endeavour to verify sensitive information from official sources before disseminating it adding that before foreign loans were contracted, very sensitive steps were taken by multiple institutions of government to ensure that they were beneficial to the nation.

She said, “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.’’

Going further, Oniha explained that the loans agreements provided a number of steps to take to resolve disputes when they arise.

She said, “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 explained that the DMO in conjunction with the CBN and the Office of the Accountant-General of the Federation, maintained proper records of debts, provided projections for debt service and processed the actual payments for debt service.

Some serious concerns have been raised recently by some economic can finance experts and other stakeholders through media reports, that some African countries including Nigeria, face the threat of losing some of their critical and valuable national assets to China due to high level of indebtedness.

They spoke against the backdrop of reports of the possible takeover of Uganda’s only international airport and other key assets over the East African country’s inability to repay a $207m loan obtained on November 17, 2015 from the Export-Import Bank of China.

Recall that in August 2020, Nigeria’s Minister of Transportation, Rotimi Amaechi, reportedly hinted about the possibility of Nigeria forfeiting its assets to China in the event of loan default as China could take the country to arbitration in the event of a default.

He, however, added that there would be no need for China to claim any infrastructure once Nigeria repaid its loans to the Asian country.