The Director-General, Debt Management Office (DMO), Ms Patience Oniha, on Thursday at a press briefing in Abuja, said China had written to convey its decision to halt lending to Nigeria.
Oniha said China had shared its borrowing plan and Nigeria was no longer on its lending plan; thus the country won’t be lending to Nigeria in the near term.
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The Minister of Transportation, Mr Rotimi Amaechi, had in January hinted on China’s decision to halt lending to Nigeria. He told reporters that Nigeria was looking to Europe to fund railway infrastructure as China’s lending appetite to Nigeria had waned.
“We are stuck with lots of projects because we cannot get money. The Chinese are no longer funding, so we are now pursuing money in Europe,” he had told journalists during an inspection of the Kano-Kaduna rail project under construction..
The Kaduna-Kano rail project has suffered significant delay over funding issues as the proposed loan from China to build the facility never came. Amaechi said the federal government had to resort to budgetary allocation to fund the project, valued at $1.2 billion. He also said the project delivery may be delayed if a new funding source was not activated.
Although Nigeria’s indebtedness to China is not as huge when compared to multilateral institutions, the federal government was looking to China to fund the entire Lagos to Kano standard guage project, valued at $11bn. For now, the federal government has borrowed about $2.5billion from China to fund the Abuja-Kano and Lagos-Ibadan rail projects.
Statistics by the DMO showed that as at March 31, 2020, the total borrowing by Nigeria from China was $3.121bn. This hasn’t changed as Nigeria hasn’t gotten new funds from China. This shows that Nigeria’s debt exposure to China is still at 10 per cent of its foreign debt position.
According to the DMO, the loans are concessional, with interest rates of 2.50 per cent p.a, tenor of 20 years and grace period (moratorium) of seven years. The DMO also said these terms were compliant with the provisions of section 41 (1a) of the Fiscal Responsibility Act, 2007.
The DMO said 11 projects were tied to the loans as of March 31, 2020. They include the Nigerian Railway modernisation project (Idu-Kaduna section), Abuja Light Rail project and four airport terminals expansion projects (Abuja, Kano, Lagos and Port Harcourt), Nigerian Railway Modernisation project (Lagos-Ibadan section) and rehabilitation and upgrading of Abuja-Keffi-Makurdi road.
Specific to the Buhari government, the total debt obtained from China is $1,728,140,000. The debts, based on the DMO schedule of China debts, as at March 31, 2020 as seen by our correspondent show that this government has accessed funds on the Nigerian Railway Moderninisation project (Lagos-Ibadan Section) and the Nigeria Rehabilitation and Upgrading of the Abuja-Keffi-Makurdi road project.
On the Nigerian Railway Moderninisation project (Lagos-Ibadan Section), the total loan amount is $1,267.32, taken on August 18, 2017. The interest rate per annum is 2.50 per cent, a grace period of 7 years. It has a 20-year tenor.
On the Nigeria Rehabilitation and upgrading of Abuja-Keffi-Makurdi road project, the total amount is $460.82m agreed on 18th August 18, at the same terms as above.
Oniha had previously told our correspondent on phone that Nigeria had not accessed all the funds because the project financing was tied to milestones. She said the China EXIM Bank disbursed as the project progressed. She noted that Nigeria would only pay interests on the amount that had been disbursed, especially on poor countries with low income streams.
However, Nigeria isn’t the only African country affected as China is cutting down lending to most African countries.
Jinping, the Chinese president had in a “video speech to the triennial forum of China-Africa Cooperation in Senegal in November 2021 said the country would cut the headline amount of money it supplied to Africa by a third to $40bn. He implied redirecting lending away from large infrastructure towards a new emphasis on small and medium enterprises, green projects and private investment flows.
“China is moving away from this high-volume, high-risk paradigm into one where deals are struck on their merit, at a smaller and more manageable scale than before, a forthcoming analysis of China’s lending to Africa by Chatham House, a UK think-tank, will say,” Financial Times further reported.
While it is not clear why China took the decision, the International Monetary Fund (IMF) and the World Bank had several times raised concerns over the terms of China’s loans to countries. Both institutions had also advised third world countries to be careful with China deals that looked too good to be what they really are.
Also, parliaments of African countries, Nigeria and Uganda inclusive, had raised fears over clauses in the loans that seemed to cede sovereignty of assents funded by China loans to China; meaning that China can take over those assets when the countries default on terms of payments. Yet, some of the assets could present security risks if wholly owned and managed by foreign entities.
Perhaps, these queries by parliaments of some African countries have exposed the intentions of China and may have contributed to their decision to halt further lending.
This is because if they cannot take over the assets in the future in the event of a loan default, they may not be able to recover their loans.
And many experts have suggested that a lot of African countries would default on the loans, especially with corruption and mismanagement of resources in those countries.
But on the rail projects, there seems to be some respite for Nigeria. Minister Amaechi told our correspondent exclusively on Friday that the Chinese government had commenced a fresh negotiation with Nigeria, with the intention to fund the rail projects.
An expert on Nigeria-China relations, Dr Tochukwu Okeke, said the current relationship between Nigerian and China must be based on a mutual benefit, not lopsided in favour of the Asian giant.
He spoke at a capacity building workshop for media and the civil society on Monday, titled, “Countering Chinese Authoritarian Influence in Nigeria through Advocacy in the National Assembly.”
He delivered a paper titled, “The Concept of Foreign Relations, with Particular Focus on China: Highlighting its Most Common Manifestations and Implications for Nigeria.”
Okeke, a lecturer in the University of Abuja, said Nigeria had a long history of relations with China, which existed at different levels through decades.
He said, “Sino-Nigeria relations have lasted for 60 years. This period of their relationship has been characterised by both positive and negative engagements.
“Because of the fact that it is a superpower or rising superpower engaging a power that is not so super, Nigeria is holding the short end of the stick. So, it has become imperative for us to understand the nature of the dynamics of these relationships and understand how we can leverage on it, notwithstanding the fraudulent or secrecy shrouded in the deals. This is because after all, this is a country where there is endemic public corruption.
“Whether you take loans from China or not, your money is going to vanish. These are some of the issues.”
On his part, Dr Kola Idowu of Kimpact Development Initiative advised the media to be fully engaged in the promotion of the country’s interests as regards bilateral agreements being entered into by Nigeria with China or any other country.
He said that by so doing, through consistent reportage to inform citizens about the deals being signed, Nigerians would have a true situation of things while their government is being held responsible for all its actions, especially when it involves the country’s sovereignty and future.
Dr Terfa Gbahabo of the National Institute for Legislative and Democratic Studies (NILDS) also said National Assembly members should, as part of their oversight functions and duties, scrutinise loan requests from the executive before approving.
He said it was discovered that while the legislators, through their various relevant committees questioned some of the loan agreements, they had never been part of the negotiations for what they approved.
He said they had carried out a research on the lawmakers’ perception of Sino-Nigeria relations in the socio-economic and political spheres.
He said most of the lawmakers had expressed optimism that the relationship between the two countries was mutually beneficial and Nigeria stood to gain a lot.
Rowland Ataguba, a rail expert, had told our correspondent that the federal government should advertise the rail projects for competitive bidding and funds would come in.
“Let the Chinese compete with others to provide services transparently; not an opaque and hush-hush government-to-government deals with confidentiality and suspension of sovereign immunity clauses.
“It is not just about advertising, it is what you are advertising? How was the deal prepared? Who did the preparation? How was he procured? Remember power privatisation; the process was designed to throw up cronies.
“The simple solution is: ask the World Bank to help you. But our people continue to run away from this because it introduces transparency and accountability” he stated.
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