The Director General of the Debt Management Office (DMO), Ms. Patience Oniha, told a press briefing in Abuja on Thursday that China had written to announce its decision to suspend lending to Nigeria.
Oniha said China shared its borrowing plan and Nigeria was off its loan plan; the country will therefore not lend to Nigeria in the short term.
Transport Minister Rotimi Amaechi hinted in January at China’s decision to stop lending to Nigeria. He told reporters that Nigeria was looking to Europe to fund rail infrastructure as China’s appetite for loans to Nigeria had dwindled.
“We’re stuck with a lot of projects because we can’t get the money. The Chinese are no longer financing, so we are now looking for money in Europe,” he told reporters during an inspection of the Kano-Kaduna railway project under construction.
The Kaduna-Kano railway project suffered a major delay due to funding issues, as the loan offered by China to build the facility was never granted. Amaechi said the federal government had to resort to a budget allocation to fund the project, valued at $1.2 billion. He also said that the delivery of the project could be delayed if a new source of funding is not activated.
Although Nigeria’s indebtedness to China is not so huge compared to multilateral institutions, the Federal Government was looking to China to fund the entire Lagos-Kano standard gauge project valued at $11 billion. . So far, the federal government has borrowed about $2.5 billion from China to fund the Abuja-Kano and Lagos-Ibadan rail projects.
DMO statistics showed that as of March 31, 2020, Nigeria’s total borrowing from China was $3.121 billion. This has not changed as Nigeria has not received new funds from China. This shows that Nigeria’s debt exposure to China still amounts to 10% of its external debt.
According to the DMO, the loans are concessional, with interest rates of 2.50 percent per annum, a term of 20 years and a grace period (moratorium) of seven years. The DMO also stated that these conditions complied with the provisions of Section 41(1a) of the Fiscal Responsibility Act 2007.
The DMO said 11 projects were linked to the loans as of March 31, 2020. They include the Nigerian Railway Modernization Project (Idu-Kaduna Section), the Abuja Light Rail Project and four terminal expansion projects. airport (Abuja, Kano, Lagos and Port Harcourt). ), Nigerian Railways Modernization Project (Lagos-Ibadan Section) and Abuja-Keffi-Makurdi Road Rehabilitation and Upgrading.
Specific to the Buhari government, the total debt obtained from China is $1,728,140,000. The debts, based on the DMO calendar of Chinese debts, as of March 31, 2020, as seen by our correspondent, show that this government has accessed funds on the Nigerian Railways Modernization Project (Lagos-Ibadan Section) and the rehabilitation and modernization of Nigeria. Abuja-Keffi-Makurdi road project.
On the Nigerian Railways Modernization Project (Lagos-Ibadan section), the total amount of the loan is $1,267.32, contracted on August 18, 2017. The annual interest rate is 2.50%, a 7 year grace period. It has a duration of 20 years.
Regarding the Abuja-Keffi-Makurdi Road Rehabilitation and Upgrading Project in Nigeria, the total amount is $460.82 million agreed on 18 Aug 18, on the same terms as above.
Oniha had previously told our correspondent by phone that Nigeria had not accessed all the funds because the funding for the project was tied to milestones. She said China EXIM Bank is disbursing as the project progresses. She noted that Nigeria would only pay interest on the amount that had been disbursed, especially on poor low-income countries.
However, Nigeria is not the only African country affected as China cuts its loans to most African countries.
Jinping, the Chinese president had in a “video speech at the triennial China-Africa cooperation forum in Senegal in November 2021, said the country would cut the overall amount of funds it provides to Africa by one-third. $40 billion. It involved redirecting lending from large infrastructure to a new focus on small and medium enterprises, green projects and private investment flows.
“China is moving away from this high-volume, high-risk paradigm to one where deals are made on their merit, on a smaller, more manageable scale than before, an upcoming analysis of China’s loans to Africa by Chatham House, a British think-tank, will say,” the Financial Times further reported.
While it’s unclear why China made the move, the International Monetary Fund (IMF) and World Bank have repeatedly raised concerns about the terms of China’s loans to countries. The two institutions had also advised Third World countries to be careful of deals with China that seemed too good to be what they really are.
In addition, parliaments in African countries, including Nigeria and Uganda, had raised concerns about clauses in the loans that appeared to cede sovereignty of agreements funded by Chinese loans to China; meaning that China can take over these assets when countries default on payment terms. Still, some of the assets could pose security risks if wholly owned and managed by foreign entities.
Perhaps these questions from the parliaments of some African countries revealed China’s intentions and may have contributed to its decision to stop further lending.
This is because if they cannot take back the assets in the future in the event of default, they might not be able to recover their loans.
And many experts have suggested that many African countries will default on loans, particularly due to corruption and mismanagement of resources in those countries.
But on rail projects, there seems to be some respite for Nigeria. Minister Amaechi exclusively told our correspondent on Friday that the Chinese government had started a new negotiation with Nigeria, with the intention of financing the railway projects.
A Nigeria-China relations expert, Dr. Tochukwu Okeke, said the current relationship between Nigeria and China should be based on mutual benefit, not skewed in favor of the Asian giant.
He spoke on Monday at a capacity-building workshop for media and civil society, titled “Countering Chinese Authoritarian Influence in Nigeria through Advocacy in the National Assembly”.
He presented a paper titled “The Concept of Foreign Relations, with Particular Emphasis on China: Highlighting Its Most Common Manifestations and Implications for Nigeria.”
Okeke, a senior lecturer at the University of Abuja, said Nigeria has a long history of relations with China, which have existed at different levels over the decades.
He said: “China-Nigeria relations have been going on for 60 years. This period of their relationship was characterized by both positive and negative commitments.
“Due to the fact that it is a superpower or a rising superpower engaging a power that is not so super, Nigeria holds the end of the stick. So it has become imperative for us to understand the nature of the dynamics of these relationships and to understand how we can take advantage of them, despite the fraud or secrecy that surrounds the transactions.This is because, after all, this is a country where public corruption is endemic.
“Whether you take loans in China or not, your money will disappear. These are some of the problems.
For his part, Dr. Kola Idowu of Kimpact Development Initiative advised the media to engage fully in promoting the interests of the country with regard to bilateral agreements that Nigeria has entered into with China or any other country.
He said that by doing so, through consistent reporting to inform citizens of the agreements being signed, Nigerians would have a true state of affairs while their government would be held accountable for all its actions, especially when it goes wrong. is about sovereignty and the future of the country.
Dr. Terfa Gbahabo of the National Institute for Legislative and Democratic Studies (NILDS) also said that members of the National Assembly should, as part of their oversight functions and duties, consider loan applications from the executive before approving them.
He said it was discovered that while lawmakers through their various relevant committees questioned some of the loan agreements, they were never part of the negotiations for what they approved.
He said they had conducted a research on the legislators’ perception of China-Nigeria relations in the socio-economic and political spheres.
He said most lawmakers had expressed optimism that the relationship between the two countries was mutually beneficial and that Nigeria had a lot to gain.
Rowland Ataguba, a railway expert, had told our correspondent that the federal government should advertise the railway projects for a tender and that funds would arrive.
“Let the Chinese compete with others to provide services transparently; not an opaque and secret government-to-government agreement on confidentiality and the suspension of sovereign immunity clauses.
“It’s not just about advertising, is it what you advertise? How was the agreement prepared? Who did the preparation? How was it obtained? Remember the privatization of power; the process was designed to throw up buddies.
“The simple solution is this: ask the World Bank to help you. But our people continue to shun this because it introduces transparency and accountability,” he said.