Nigeria’s debt to China increases from $4.73bn for 2023 H1

Nigeria’s debt to China increased from $3.93bn as of June 30, 2022, to $4.73bn as of June 30, 2023, showing an increase of $800m in one year.

It is an increase of 20.36 per cent from the second quarter of 2022 to Q2 2023, according to an analysis of the external debt stock data from the Debt Management Office.

Although the Federal Government has been chiefly secretive about the terms of the agreement of its China loans, the DMO has made some statements on them in the past.

In a statement in June 2020, the DMO said, “The total borrowings from China of $3.121bn as of March 31, 2020, are concessional loans with interest rates of 2.5 per cent per annum, tenor of 20 years and grace period (moratorium) of seven years.”

According to the DMO, the terms are compliant with the provisions of Section 41 (1a) of the Fiscal Responsibility Act, 2007.

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In addition, the low interest rate reduces the interest cost to the government while the long tenor enables the repayment of the principal sum of the loans over many years.

In a document titled ‘Status of Chinese loans as at September 30, 2021’, the DMO disclosed that 15 projects were funded by the loans acquired from China. These projects range from water supply, power generation, railways, airport terminals, and communication to agricultural processing.

The first loan project was for the Nigerian Communications Satellite project with $200m agreed on January 12, 2006. This was a five-year loan that matured on June 29, 2018. Nigeria successfully paid off the loan, which had an interest rate of three per cent per annum, leading to the payment of $40.02m as the interest rate.

The second loan was for the Nigerian national public security communication system project with $399.50m agreed on December 20, 2010, and disbursed.

The third loan was for the Nigerian railway modernisation project (Wu- Kaduna section) with $500m agreed on December 20, 2010, and disbursed.

The document also showed that there are varying interest rates, which range from 2.5 per cent to three per cent, and are not solely fixed on 2.5 per cent as the DMO claimed in its statement in June 2020.

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.