Debt Management Office (DMO) director-general Ms Patience Oniha said at a news conference in Abuja on Thursday that China had written to share its decision to stop lending to Nigeria.
Oniha said China has split its credit schedule and Nigeria is no longer on its credit schedule; therefore, the country will not provide loans to Nigeria in the short term.
Transport Minister Rotimi Amaechi highlighted China’s decision to stop lending to Nigeria in January. He told reporters that Nigeria is looking to Europe to fund rail infrastructure as China’s appetite for loans to Nigeria has waned.
“We get stuck in many projects because we don’t get any money. The Chinese aren’t funding anymore, so we are now seeking money in Europe,” he told reporters during an inspection of the Kano-Kaduna railway project under construction.
The Kaduna-Kano railway project has suffered significant delays due to funding problems, as the proposed loan from China to build the facility never came. Amaechi said the federal government must draw on budget funds to fund the $1.2 billion project. He also said that project delivery could be delayed if a new funding source is not activated.
Although Nigeria’s debt to China is not that large compared to multilateral institutions, the federal government expected China to fund the entire Lagos to Kano standard track project, worth US$11 billion. Currently, the federal government has borrowed about $2.5 billion from China to fund the Abuja-Kano and Lagos-Ibadan railway projects.
Statistics from the DMO showed that Nigeria’s total borrowing from China as of March 31, 2020 was US$3.121 billion. This has not changed as Nigeria has not received any new funds from China. This shows that Nigeria’s debt exposure to China is still 10 percent of its external debt position.
According to the DMO, the loans are discounted, with an interest rate of 2.50 percent pa, a term of 20 years and a grace period (moratorium) of seven years. The DMO also said these terms comply with the provisions of Section 41(1a) of the Fiscal Responsibility Act 2007.
According to the DMO, eleven projects were tied to the loans as of March 31, 2020. These include the Nigerian Railways Modernization Project (Idu-Kaduna section), the Abuja Light Rail project and four airport terminal expansion projects (Abuja, Kano, Lagos and Port Harcourt). ), Nigerian Railways Modernization Project (Lagos-Ibadan Section) and Rehabilitation and Modernization of the Abuja-Keffi-Makurdi Road.
Specific to the Buhari government, the total debt received by China is $1,728,140,000. The debts, based on the DMO list of Chinese debts as of March 31, 2020, as seen by our correspondent, show that this government is drawing on funds for the Nigerian Railways Modernization Project (Lagos-Ibadan Section) and the refurbishment and modernization Abuja-Keffi-Makurdi road project from Nigeria.
For Nigerian Railways Modernization Project (Lagos-Ibadan Section), the total loan amount is $1,267.32, borrowed on August 18, 2017. The interest rate per annum is 2.50 percent, a grace period of 7 years. It has a term of 20 years.
For the rehabilitation and upgrading of Abuja-Keffi-Makurdi Road Project in Nigeria, the total amount is US$460.82 million, which was agreed on 18-Aug-18 on the same terms as above.
Oniha had previously told our correspondent over the phone that Nigeria had not drawn down all funds as project funding was tied to milestones. She said China EXIM Bank paid out as the project progressed. She pointed out that Nigeria would only pay interest on the amount paid out, especially in poor countries with low income streams.
Nigeria is not the only African country affected, however, as China cuts lending to most African countries.
Jinping, the Chinese President, had said in a “video speech ahead of the triennial forum of China-Africa cooperation in Senegal in November 2021 that the country will reduce the total amount of funds it sends to Africa by a third to 40 billion.” cut dollars. He indicated a shift in lending away from large infrastructure to a new emphasis on small and medium-sized enterprises, green projects and private investment flows.
“China is moving away from this high-volume, high-risk paradigm towards a paradigm where deals are done on a merit basis, on a smaller and more manageable scale than before, a forthcoming analysis by Chatham House, a British think, on China’s lending to Africa – tank, will say,” the Financial Times further reported.
Although it is not clear why China made the decision, the International Monetary Fund (IMF) and World Bank have repeatedly raised concerns about the terms of China’s lending to countries. Both institutions had also advised third world countries to be wary of China deals that looked too good to be what they really are.
African countries’ parliaments, including Nigeria and Uganda, had also expressed concerns about clauses in the loans that appeared to cede sovereignty over Chinese-funded loans to China; This means China can take over these assets if countries default on payment terms. However, some of the assets could pose security risks if wholly owned and managed by foreign companies.
Perhaps these inquiries from the parliaments of some African countries uncovered China’s intentions and contributed to their decision to halt further lending.
Because if they are unable to take over the assets in the event of a loan default in the future, they may not be able to recover their loans.
And many experts have suggested that many African countries are defaulting on loans, particularly because of corruption and resource mismanagement in those countries.
But there seems to be some lull in Nigeria’s railway projects. Minister Amaechi exclusively told our correspondent on Friday that the Chinese government has started new negotiations with Nigeria to finance the railway projects.
An expert on Nigeria-China relations, Dr. Tochukwu Okeke said the current relationship between Nigeria and China must be based on mutual benefit and not in favor of the Asian giant.
He was speaking at a media and civil society capacity-building workshop on Monday entitled Countering Chinese Authoritarian Influence in Nigeria through Advocacy in the National Assembly.
He held a paper entitled “The Concept of Foreign Relations, with Special Focus on China: Highlighting its Most Common Manifestations and Implications for Nigeria”.
Okeke, a lecturer at the University of Abuja, said Nigeria has a long history of relations with China, spanning decades at various levels.
He said: “China-Nigeria relations have existed for 60 years. This period of their relationship was marked by both positive and negative commitments.
“Due to the fact that it is a superpower or an emerging superpower dealing with a power that is not so super, Nigeria is holding the short end of the stick. Therefore, it has become imperative for us to understand the nature of the dynamics of these relationships and how we can leverage them regardless of the fraudulent or secret dealings. This is because this is, after all, a country where there is endemic public corruption.
“Whether you borrow from China or not, your money will go away. These are some of the problems.”
dr For his part, Kola Idowu of the Kimpact Development Initiative advised the media to be fully engaged in promoting the country’s interests in relation to bilateral agreements Nigeria concludes with China or any other country.
He said that by consistently reporting to inform citizens about the signed agreements, Nigerians would have a real state of affairs while their government is held accountable for all their actions, especially when it comes to the country’s sovereignty and future.
dr Terfa Gbahabo of the National Institute for Legislative and Democratic Studies (NILDS) also said that members of the National Assembly, as part of their oversight roles and duties, should review executive branch loan applications before approving them.
He said it had been noted that while lawmakers, through their various competent committees, had questioned some of the loan agreements, they had never participated in the negotiations of what they had approved.
He said they conducted a study on lawmakers’ perceptions of Sino-Nigerian relations in the socio-economic and political spheres.
He said most lawmakers have expressed optimism that the relationship between the two countries is mutually beneficial and that Nigeria has much to gain.
Rowland Ataguba, a railroad expert, had told our correspondent that the federal government should put railroad projects out to competitive bidding and funds would come.
“Let the Chinese compete with others to offer services transparently; no opaque and secretive government-to-government negotiations with confidentiality and the lifting of state immunity clauses.
“It’s not just about advertising, it’s what you’re promoting? How was the deal prepared? Who did the preparation? How was it obtained? Remember the privatization of power; The process was designed to throw sidekicks.
“The simple solution is: ask the World Bank to help you. But our people continue to run away from it because it introduces transparency and accountability,” he explained.