There have been concerns among Nigerians with the increasing level of loans the federal government takes from China.
The House of Representatives had on 12 May mandated its Committees on Treaties, Protocols and Agreements, Finance as well as Debt Management Office (DMO), to cooperate with the Ministry of Finance and the DMO to seek review or outright cancellation of recent Chinese loans to Nigeria on the principle of force majeur.
The committee is to look into all loan agreements between Nigeria and China since 2002 to ascertain its viability with a view of possibly regularizing and renegotiating the loans agreements.
Nigeria Debt Management Office on 18 June issued a press release to address the concerns over the country’s loans from China.
However, the press release failed to address the major concern on the possibility of China taking possession of the assets financed by the loans in the event that Nigeria defaults on its repayment plan.
The question, Can China Take Possession of the Projects Financed by them if Nigeria Defaults in the Servicing of the Loan?
The DMO issued the following answer “Firstly, Nigeria explicitly provides for Debt Service on its External and Domestic Debt in its Annual Budgets. In effect, this means that Debt Service is recognised and payment is planned for. In addition, a number of the projects being (and to be) financed by the Loans are either revenue generating or have the potential to generate revenue.”
A critical look at this response showed that the main issue in the question which is the possibility of China taking over ownership of the said projects in the country, was not addressed.
According to the press release, “the Total Borrowing from China are concessional Loans with Interest Rates of 2.50% p.a., Tenor of Twenty (20) years and Grace Period (Moratorium) of Seven (7) years.
“As at March 31, 2020, the Total Borrowing by Nigeria from China was USD3.121 billion (N1,126.68 billion at USD/N361). This amount represents only 3.94% of Nigeria’s Total Public Debt of USD79.303 billion (N28,628.49 billion at USD/N361) 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 USD27.67 billion at the same date”
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According to the DMO, the loans from china are tied to 11 projects. “The USD3.121 billion Loans are project-tied Loans. The projects, (eleven – 11 in number as at March 31, 2020), include: Nigerian Railway Modernization Project (Idu-Kaduna section), Abuja Light Rail Project, Nigerian Four Airport Terminals Expansion Project 2 (Abuja, Kano, Lagos and Port Harcourt), Nigerian Railway Modernization Project (Lagos-Ibadan section) and Rehabilitation and Upgrading of Abuja – Keffi- Makurdi Road Project.”
The loan amount for 4 out of the 11 projects has been fully (100%) disbursed to Nigeria. These projects are
- Nigerian National Public Security communication system project: loan amount is $399.5 million and the agreement date was 20 December 2010.
- Nigerian railway modernization project (Idu-Kaduna section): loan amount is $500 million and the agreement date was 20 December 2010
- Abuja light rail project: loan amount is $500 million and agreement date was 7 November 2012
- Nigerian ICT infrastructure backbone project: loan amount is $100 million and the agreement date is 5 January 2013
For more details on the loans and all the loans disclosed by the DMO click here.
Representative Igbakpa (representing Ethiope East/West Federal Constituency of Delta State), who raised the motion for the review of China loan contract to House of representatives, while in a chat with reports said;
“So as it is now, we have obtained a total of 17 loans from China and those loans are of various categories of projects. And we are going to service these loans till 2038 which is the maturity date for the last loans obtained in 2018. So, for me this is the kind of loan that we consider as black market loans.
“In all these 17 loans, the National Assembly does not know. We have committees for Treaties, Agreements and Protocols. They are not aware. We are dealing with international treaties, agreements that are bilateral whether trade or security, whatever it is.
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“In some parts of Africa today, the Chinese have already set up their own structure to take over some infrastructure they constructed for these countries that cannot pay: talk about Sri Lanka, Zimbabwe, Djibouti, Zambia, Namibia and Angola, even in South Africa. These loans are laden with lies and fraud that make them difficult for these countries to pay.
“Now in Nigeria, transportation and ICT, they have six projects each. How will you feel if one day, China comes and takes over, manage our rail system? In energy sector, they have three; in Agric and Water, they have two projects each. So, these Chinese loans are black market loans; they are one-chance loans.
There is contradiction between his statement and that of the DMO. According to Igbakpa there are 17 loans from China whereas the DMO said it was 11 loans.
At the last count Nigeria has obtained 17 Chinese loans to fund different categories of capital projects and Nigeria would still be serving the Chinese loans till around 2038, the maturity date for the last loans obtained in 2018. /11
— Rep. Ben Igbakpa (@benigbakpa) May 12, 2020
Written by
Ifunanya Ikueze
