Skip to main content

Debt: Nigeria Reveals Plan To Prevent China From Taking Over Infrastructures


The Debt Management Office (DMO) has revealed that Nigeria has a plan for debt payment and disclosed the actually amount Nigeria owes to China.

While clarifying that China isn't the major source of credit for Nigeria, DMO said China only accounts for 3.94% of Nigeria’s total public debt of $79.303 as at March 31, 2020. According to statement from the office, the total value of loans Nigeria has obtained from China as at March 31, 2020 is $3.121 billion.

This means China accounts for 11.28% of the external debt stock of $27.67 billion. And the Chinese loans are concessionary, as the Asian country offered Nigeria more generous terms than market rate loans. This resulted in an interest rates of 2.5% per annum, tenor of 20 years and a moratorium of 7 years.

How Does The Loans/Terms Affect Nigeria

The concessionary loans affords the Nigerian government pay back the loan at a low interest rate for a long term, rather than repay the loan at a high rate within a short or long term - this reduces the budget for debt service.

Recall that for every N1 made by Nigeria, 96kobo is used to repay loan, according to the Director of Centre for Infrastructure Policy Regulation and Advancement (CIPRA), Lagos Business School, Dr Bongo Adi. This situation places Nigeria's debt service at a dilemma.

With revenue declining amidst coronavirus, Nigeria can't afford to default on Chinese debt - even though China is considering debt freeze - as the country is known for tying infrastructure to collateral in case of debt default. There is a term called, Chinese Chopstick Imperialism, which represents China's decision to tie the loan to infrastructure.

The Asian country has been reported of using financial support like loans to take over the infrastructure of countries, especially the developing countries. Sri Lankan lost its Magampura Mahinda Rajapaksa Port which was funded with a loan from Exim Bank of China after it defaulted.

Zambia and Rwanda are on the verge of losing state electricity company ZESCO and Port of Mombasa respectively, due to their inability to repay their debt. The countries are reportedly in talks on the debt situation. But DMO says Nigeria has made provision for the debt service of External and Domestic Debt in its Annual Budgets and the infrastructures built from the loans generate revenue.

The Infrastructures Built From The Chinese Loans

The $3.121 billion was spent on eleven projects; Nigerian Railway Modernization Project (Idu-Kaduna section), Abuja Light Rail Project, Nigerian Four Airport Terminals Expansion Project (Abuja, Kano, Lagos and Port Harcourt), Nigerian Railway Modernization Project (Lagos-Ibadan section).

Part of the project includes Rehabilitation and Upgrading of Abuja-Keffi- Makurdi Road Project. These projects will play a role in the repayment of the Chinese debt.

Labels:

Comments

Post a Comment

Popular posts from this blog

NSE vows to enhance retail investment opportunities

NSE vows to enhance retail investment opportunities   The Nigerian Stock Exchange has expressed its commitment to redefining and improving investors’ overall experience in the Nigerian capital market, and ensuring that it remains modern, convenient and secure. This was highlighted at the inaugural edition of the Retail Investors’ Webinar hosted by the Exchange in collaboration with the Nigerian International Securities Limited on Monday. The event, with the theme ‘Capital market investing in a digital age’, was supported by the Chartered Institute of Stockbrokers and the Association of Securities Dealing Houses of Nigeria. Speaking during the webinar, the Chief Executive Officer, NSE, Mr Oscar Onyema, said, “Investor participation is central to the growth and sustainable development of any economy. “The Exchange is, therefore, committed to facilitating conversations that will expound on the retail investment opportunities available in the capital market and the chann...
Post a Comment
Read more

NAIRA WEAKENS TO LOWEST IN THREE YEARS

NAIRA WEAKENS TO LOWEST IN THREE YEARS The Naira yesterday weakened to the lowest in over three years in the parallel market due to increased demand for dollars amid foreign-currency shortages. The local currency depreciated to N495 to a dollar yesterday, lowest since February 23, 2017, widening the gap with the official rate of N379.5 to over 30 per cent. The currency traded in the interbank market at 389.74 as of 4:54p.m. in Lagos. Agency reports quoted traders as alleging a groundswell of diversion of dollars, a development which heightened scarcity of the green back in the parallel market this week. There is a diversion of inflows away from official channels to the parallel market due to the gap in rates, Murega Mungai, trading desk manager for Aza Finance said in a note Thursday. The market spread has created arbitrage opportunities for recipients of remittances such as exporters and private individuals. Pent up demand in the foreign exchange market is not unprecedente...
Post a Comment
Read more

Petrol scarcity looms as tanker drivers halt operations

Petrol scarcity looms as tanker drivers halt operations   Petrol scarcity may surface across the country as the Nigerian Association of Road Transport Owners on Monday ordered tanker drivers nationwide to halt operations beginning from Tuesday (today). NARTO gave the directive in Abuja in protest against the Federal Government’s ban on petroleum trucks above 45,000 litres from plying Nigerian roads. NARTO is the umbrella organisation of all commercial vehicles owners in Nigeria engaged in the haulage of petroleum products, general cargoes, and movement of goods and passengers within the country and the West-African sub-region. Speaking at a press briefing in Abuja, NARTO’s National President, Yusuf Othman, said members of the association would have to park their trucks on Tuesday and Wednesday as warning to government against the abrupt ban. He said, “NARTO received with grave shock the recent government decision to place immediate ban on all petroleum trucks above 45,...
Post a Comment
Read more