Nigeria’s debt to China increased from $3.93bn as of June 30, 2022, to $4.73bn as of June 30, 2023, showing an increase of $800m in one year.
It is an increase of 20.36 per cent from the second quarter of 2022 to Q2 2023, according to an analysis of the external debt stock data from the Debt Management Office.
Although the Federal Government has been chiefly secretive about the terms of the agreement of its China loans, the DMO has made some statements on them in the past.
In a statement in June 2020, the DMO said, “The total borrowings from China of $3.121bn as of March 31, 2020, are concessional loans with interest rates of 2.5 per cent per annum, tenor of 20 years and grace period (moratorium) of seven years.”
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According to the DMO, the terms are compliant with the provisions of Section 41 (1a) of the Fiscal Responsibility Act, 2007.
In addition, the low interest rate reduces the interest cost to the government while the long tenor enables the repayment of the principal sum of the loans over many years.
In a document titled ‘Status of Chinese loans as at September 30, 2021’, the DMO disclosed that 15 projects were funded by the loans acquired from China. These projects range from water supply, power generation, railways, airport terminals, and communication to agricultural processing.
Only the 15th loan project was presented in Chinese Renminbi Yuan.
The document also showed that there are varying interest rates, which range from 2.5 per cent to three per cent, and are not solely fixed on 2.5 per cent as the DMO claimed in its statement in June 2020.
Regarding repayments, The PUNCH observed that within the period under review, Nigeria serviced Chinese loans with $263.14m.
However, data from the external debt service reports showed that Nigeria is likely not required to make any payments in Q2 as no debt service payment was recorded for Chinese loans in Q2 of 2022 and 2023.
With growing concerns that Nigeria may forfeit assets in the event of a loan default, the Director-General, DMO, Patience Oniha, in 2021, assured Nigerians that the loans were largely concessional, as no national asset was tagged as collateral.
The PUNCH recently reported that the United States said China had the potential to influence the Nigerian government through Chinese loans.
This was stated in the Integrated Country Strategies document by the US Department of State, obtained by The PUNCH.
The document was originally approved on April 6, 2022, but was reviewed and updated on June 23, 2023.
According to the document, China offered sub-prime financing for various infrastructure projects in the country.
The Corporate Finance Institute described a subprime loan as a loan offered to individuals at an interest rate above prime, who do not qualify for conventional loans.
The document read in part, “Meanwhile, China offers sub-prime financing for a range of infrastructure projects, with the potential to add unnecessarily to Nigeria’s debt burden and increase Chinese influence over the Nigerian government.”
The PUNCH reported in January 2022 that a Chinese company, Chinese Civil Engineering Construction Corporation, handled the majority of railway projects in Nigeria worth over $25.51bn (N10.5tn), according to the United States-based Fitch Solutions’ latest report on Nigeria’s railway system.
The report, titled ‘Nigeria Rail: Near-term focus on Northern region with long-term upside for Southern projects’, said Chinese financing had enabled CCECC to handle most rail projects in the country.
The report, however, listed other companies that were major players in the Nigerian railway sector.
