China’s $3.12bn Loans Only 11.28% Of Nigeria’s External Debt – Dmo
The Debt Management Office (DMO) on Wednesday made some clarifications on Nigeria’s loan transactions with the Government of China.
The House of Representatives has been locked in battle with the Federal Ministry of Transportation over ceding of Nigeria’s sovereignty to China when borrowing from the Asian country.
The DMO, in a statement issued in Abuja, stated that Nigeria’s total borrowings from China stood at US$3.121 billion as at March 31, 2020.
The figure, according to the DMO, is only 11.28% of the Nigeria’s external debt stock of US$27.67 billion as at March 31, 2020.
It also disclosed that the loans from the Asian country represents 3.94% of the country’s total public debt of US$79.303 billion by end of March, this year.
The government agency added, “These data, show that China is not a major source of funding for the Nigerian Government.”
It stated that the Chinese loans were project-tied loans comprising of 11 projects.
It listed the projects backed with the loans as: Nigerian Railway Modernization Project (Idu-Kaduna section), Abuja Light Rail Project, and Nigerian Four Airport Terminals Expansion Projects (Abuja, Kano, Lagos and Port Harcourt), Nigerian Railway Modernization Project (Lagos-Ibadan Section), and Rehabilitation and Upgrading of Abuja – Keffi- Makurdi Road Project.
The DMO further explained, “The impact of these loans is not only evident but visible. For instance, the Idu – Kaduna Rail Line has become a major source of transportation between Abuja and Kaduna.
“Also, the new International Airport in Abuja, has improved air transportation for the populace, while the Lagos – Ibadan rail line when completed, will ease traffic on the busy Lagos -Ibadan Expressway.
“The projects also have the added benefits of job creation, not only by themselves but through direct and indirect service providers, a number of which are Small and Medium Enterprises.
“It is widely accepted that investment in infrastructure is one of the most effective tools for countries to achieve economic growth and development. Using Loans from China to finance infrastructure is thus in alignment with this position.”
The DMO stated that the loans were concessionary, with low-interest terms, adding that Nigeria has no cause to be worried.
“The loans were taken on interest Rates of 2.50% p.a., Tenor of 20 years and Grace Period (Moratorium) of 7 years.
“These 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 Government, while the long tenor enables the repayment of the principal sum of the Loans over many years.
‘’These two benefits make the provisions for debt service in the Annual Budget lower than they would otherwise have been if the loans were on commercial terms,” it said.
The DMO further clarified that Nigeria explicitly provided 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,” it stated.