Nigeria’s debt to China saw a notable increase, rising from $3.93 billion as of June 30, 2022, to $4.73 billion as of June 30, 2023, marking an $800 million increase within a year.
This surge represents a substantial growth of 20.36% from the second quarter of 2022 to Q2 2023, based on an analysis of external debt stock data from the Debt Management Office.
While the Nigerian government has maintained a degree of secrecy regarding the terms of its loans from China, the Debt Management Office (DMO) has provided some insights in the past.
According to DMO statements in June 2020, loans from China, totaling $3.121 billion as of March 31, 2020, are considered concessional. They come with interest rates of 2.5% per annum, a tenor of 20 years, and a grace period (moratorium) of seven years.
These terms align with the provisions of the Fiscal Responsibility Act, 2007, offering low interest rates and extended repayment periods.
A closer look at the 15 projects financed by Chinese loans reveals a diverse range, encompassing water supply, power generation, railways, airport terminals, communication, and agricultural processing. These projects are instrumental in Nigeria’s infrastructure development and economic growth.
The projects vary in terms of disbursement and interest rates. While some loans have been fully disbursed, others remain partially disbursed. Interest rates range between 2.5% and 3%, contradicting the initial claim by the DMO that all loans were fixed at 2.5%.
Repayments for these loans have been ongoing, with Nigeria servicing Chinese loans with $263.14 million during the review period. Notably, there were no recorded debt service payments for Chinese loans in Q2 of 2022 and 2023, suggesting that Nigeria was not required to make payments during these quarters.
Amid concerns that Nigeria’s assets might be at risk in case of loan default, the Director-General of the DMO, Patience Oniha, assured the public that these loans were primarily concessional and did not involve national assets as collateral.
In addition, the United States expressed concerns about China’s potential influence over the Nigerian government through these loans, citing sub-prime financing for infrastructure projects that could exacerbate Nigeria’s debt burden.
Chinese companies, particularly the China Civil Engineering Construction Corporation (CCECC), have played a significant role in Nigeria’s railway projects, handling projects worth billions of dollars. Chinese financing has enabled these projects’ progress.
However, China’s willingness to provide further loans to Nigeria appeared to waver due to concerns over Nigeria’s ability to repay.
In 2021, Minister of Transportation Rotimi Amaechi alleged that China was becoming hesitant to lend more money due to a National Assembly probe into the government’s loan repayment capacity.
In March 2023, the China Exim Bank rejected a significant loan request from Nigeria, but there have been subsequent developments indicating a commitment to refinance and complete critical railway projects.
In conclusion, Nigeria’s relationship with China through these loans has been marked by growth, concerns, and potential alterations, highlighting the complex dynamics surrounding the country’s debt and infrastructure development.
