The Chinese loan has increased by $800 million within a span of one year, reaching a total of $4.73 billion.

Busy Bee
Busy Bee October 31, 2023
Updated 2023/10/31 at 11:13 AM

The amount of Nigeria’s debt to China increased by $800 million in one year, from $3.93 billion in June 30, 2022, to $4.73 billion in June 30, 2023. This represents a 20.36% increase from the second quarter of 2022 to Q2 2023, as stated by the Debt Management Office.

While the Federal Government has been secretive about the terms of the China loans, the DMO has previously disclosed that these loans are concessional, with an interest rate of 2.5% per annum, a tenor of 20 years, and a grace period of seven years.

The DMO states that the terms of the loans adhere to the requirements of Section 41 (1a) of the Fiscal Responsibility Act, 2007.

Furthermore, the government benefits from the low interest rate as it decreases the cost of borrowing, and the extended loan period allows for the repayment of the principal amount over a longer period of time.

According to a report titled ‘Status of Chinese loans as of September 30, 2021,’ the DMO has revealed that China-funded loans have been allocated to 15 different projects. These projects encompass various sectors such as water supply, power generation, railways, airport terminals, communication, and agricultural processing.

The initial loan project involved the Nigerian Communications Satellite project, which had an agreed amount of $200m on January 12, 2006. This loan had a duration of five years and reached maturity on June 29, 2018. Nigeria successfully repaid the loan, which carried an annual interest rate of three percent, resulting in an interest payment of $40.02m.

The second loan was obtained for the Nigerian national public security communication system project. This loan amounted to $399.50m and was agreed upon on December 20, 2010, and subsequently disbursed.

Similarly, the third loan was secured for the Nigerian railway modernisation project, specifically for the Wu-Kaduna section. It amounted to $500m and was agreed upon on December 20, 2010, and disbursed accordingly.

The fourth loan was obtained for the Abuja light rail project, with an agreed amount of $500m on November 7, 2012. The funds were subsequently disbursed.

Lastly, the fifth loan was aimed at the development of the Nigerian Information and Communication Technology (ICT) infrastructure backbone project. This loan was agreed upon on January 5, 2013, and amounted to $100m. The funds were disbursed as well.

The sixth loan, agreed upon on July 10, 2013, was meant to fund the expansion projects of four airport terminals in Abuja, Kano, Lagos, and Port Harcourt. The agreed amount was $500m, but only $455.28m, which is 91.06% of the agreed amount, was disbursed.

The seventh loan, agreed upon on September 28, 2013, was designated for the Nigerian Zungeru hydroelectric power project. The agreed amount was $984.32m, but only $518.24m, which is 52.65% of the agreed amount, was disbursed.

The eighth loan, agreed upon on April 26, 2016, was intended for the Nigerian 40-parboiled rice processing plants project led by the Federal Ministry of Agriculture and Rural Development. However, no funds were disbursed for this project.

The ninth loan, agreed upon on August 18, 2017, for the Nigerian railway modernisation project (Lagos – Ibadan section), was worth $1.27bn. However, only $759.84m, which is 17.50 per cent of the agreed amount, was actually disbursed.

Similarly, the tenth loan, agreed upon on August 18, 2017, was intended for the rehabilitation and upgrading of the Abuja-Keffi-Markurdi road project. This loan amounted to $460.82m, but only $80.64m, which is 59.96 per cent of the agreed amount, was disbursed.

The eleventh loan, agreed upon on May 29, 2018, was meant for the Nigeria supply of rolling stocks and depot equipment for the Abuja light rail project. The loan was worth $157m, but no funds were disbursed.

Lastly, the twelfth loan, agreed upon on May 29, 2018, was intended for the Nigeria Greater Abuja water supply project. This loan had a value of $381.09m, but no funds were disbursed.

The 13th loan, which was for the Nigerian Four Airport Terminal Expansion Ancillary Project, amounted to $183.62m and was agreed upon on December 27, 2019. However, no funds were released for this loan.

Similarly, the 14th loan, intended for the Nigerian Four Airport Terminal Expansion Incremental Project, was agreed upon on December 27, 2019, with a total amount of $208.90m. Nevertheless, no disbursements were made for this loan.

As for the 15th loan, it was designated for the Nigerian ICT Infrastructure Backbone Phase II Project and had a value of ¥2.3bn. The agreement for this loan was made on September 5, 2018. Regrettably, only ¥480.40m was actually disbursed for this loan.

The Chinese Renminbi Yuan was used for only the 15th loan project. The document revealed that interest rates range from 2.5 per cent to three per cent, contradicting the DMO’s June 2020 statement that claimed a fixed rate of 2.5 per cent. During the time assessed, Nigeria made repayments of $263.14m towards the Chinese loans.

However, data from the external debt service reports showed that Nigeria is likely not required to make any payments in Q2 as no debt service payment was recorded for Chinese loans in Q2 of 2022 and 2023.

With growing concerns that Nigeria may forfeit assets in the event of a loan default, the Director-General, DMO, Patience Oniha, in 2021, assured Nigerians that the loans were largely concessional, as no national asset was tagged as collateral.

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