Why China Won’t Write Off Debt for Nigeria, Other Sub-Saharan Countries
After years of defaults and debt write-offs by several multilateral and bilateral institutions, China, Africa’s now largest bilateral creditor, entered Africa’s loan market with a unique model that will ensure African nations do not get away with procured loans even if their leaders squandered it.
In early 2000, President Xi Jinping announced an African Infrastructure loan project to support and open up the African economy. A vision most African leaders keyed into because of its seemingly easy process and approval when compared to the process and scrutiny involved in securing loans from the likes of World Bank, the International Monetary Fund and other top financial institutions.
However, underneath the quick response and fast approval is a complex model that ensures these African nations are indebted to China, even in certain situations like COVID-19.
To avoid unnecessary requests for debt write-offs, defaults, and reliefs, the Chinese government had limited its African loans to infrastructural projects executed by Chinese owned companies and in most cases with Chinese labour.
Deborah Brautigam, Head of the China Africa Research Initiative at JHU’s School of Advanced International Studies, put loans made by the Chinese government to African nations between 2000 and 2018 at about $152 billion.
“The Chinese have always done their lending on the idea that individual projects contribute to structural transformation and economic development,” said Deborah Brautigam, who heads the China Africa Research Initiative at JHU’s School of Advanced International Studies. The thinking is, “those projects might be good projects and viable projects to get countries to a new stage where they might be in a position to repay the loans,” she said.
However, while the World Bank and other global financial institutions may offer debt reliefs and total write off in certain situations like the world is currently experiencing with COVID-19, China is unlikely to write off any debt given the fact that those infrastructural projects are expected to get yield results in future as the economy expands.
Also, the loans are visible projects either under construction or completed, therefore, China may offer moratorium and reduce interest rates but not write off loans as experienced in April during calls for debt relief. China was the last to join and has turned down a similar request by the International Monetary Fund to write off part of the debt owed by the Republic of Congo in 2019.
World Bank Expects Nigeria’s Per Capita Income to Dip to 40 Years Low in 2020
The World Bank has raised concern about Nigeria’s rising debt service cost, saying it could incapacitate the nation from necessary infrastructure development and growth.
The multilateral financial institution said the nation’s per capita income could plunge to 40 years low in 2020.
According to Mr. Shubham Chaudhuri, Country Director for World Bank in Nigeria, the decline in global oil prices had impacted government finances, remittances from the diaspora and the balance of payments.
Chaudhuri, who spoke during the 26th Nigerian Economic Summit organised by the Nigerian Economic Summit Group and the Federal Government, said while the nation’s debt is between 20 to 30 percent, rising debt service remains the bane of its numerous financial issues and growth.
“Nigeria’s problem is that the debt service takes a big part of the government revenue,” he said.
He said, “Crisis like this is often what it takes to bring a nation together to have that consensus within the political, business, government, military, civil society to say, ‘We have to do something that departs from business as usual.’
“And for Nigeria, this is a critical juncture. With the contraction in GDP that could happen this year, Nigeria’s per capita income could be around what it was in 1980 – four decades ago.”
Nigeria’s per capita income stood at $847.40 in 1980, according to data from the World Bank. It rose to $3,222.69 in 2014 before falling to $2,229.9 in 2019.
Nigeria Will Have no Business With Fish Importation in the Next Two Years- FG
At the 35th annual conference of the Fisheries Society of Nigeria (FISON) held in Abuja on Monday, the minister of Agriculture and Rural Development, Mr Sabo Nanono, expressed plans of the federal government to initiate and implement programmes that are aimed towards diversification, especially in the agricultural sector.
The minister explained that the fishery sub-sector contributes about 4.5 percent to the National Gross Domestic Products, with an estimation of over 12 million Nigerians actively involved in fish farming and production.
He further said that despite this number, Nigeria produces 1.1 million tonnes of fishes annually, while there is a total demand of 3.6 million tonnes of fish and this puts Nigeria is at a deficit of 2.5 million tones. The shortage is supplemented through importation.
“Let me inform you that the vision of Mr President is to grow Nigeria’s agriculture sector to achieve a hunger-free nation, through agriculture that drives income growth, accelerate the achievement of food and nutritional security, generate employment and transform Nigeria into a leading player in the group of food and fish markets, and to create wealth for millions,” he said.
He also explains the ministry’s plans of diversification and development of various empowerment programmes that aid job creation.
“In line with the theme of this conference, the ministry has developed various programmes to increase domestic food/fish production and the main target is the empowerment of the youth and other groups especially the women,” he stated, adding: “All these programmes are tailored towards wealth and jobs creation, arrest and prevention of youth restiveness”.
He said the government has directed all fish importers to commence backward integration for local consumption and export to international markets, these are part of the measures of the ministry to generate employment and reduce importation of fish into the country.
In regards to this plans, Nanono said that the ministry is optimistic that Nigeria will have no business with fish importation in the next two years, considering that several companies have complied to the laid down policy.
Representing the Director of Federal Department of Fisheries, Mr Imeh Umoh, he stressed that the fishery is one of the value chains in the ministry and a force that drives wealth, job creation, contribute to food nutrition, poverty reduction and creation of diverse investment for Nigerians “especially during the economic recession which is occasioned by the COVID-19 pandemic”.
Nanono said that considering the current economic situation due to the global health pandemic and the ongoing economic recovery programme, the contribution of the fisheries and aquaculture sub-sector of Nigeria will make a significant impact in terms of job creation, income generation, poverty alleviation, foreign exchange earnings and provision of raw materials.
Mr Adegoke Agbabiaka, President of FISON said that in the last decade the government has made a paradigm shift under the Agricultural Transformation Agenda and is now considering agriculture, including fisheries and aquaculture, as a business and this will aid to achieve self-sufficiency in fish production.
FG to Launch N15 Trillion Infrastructure Company Fund
The Federal Government is presently working on a collaboration between the Central Bank of Nigeria, the Nigerian Sovereign Wealth Investment Authority and other stakeholders to establish an Infrastructure Company Fund.
According to the Vice President, Yemi Osinbajo, the N15 trillion Infrastructure Company Fund will address some of the nation’s critical infrastructure needs.
Osinbajo, who represented President Muhammadu Buhari at the opening session of the 26th Nigerian Economic Summit Group Conference themed ‘Building partnerships for resilience’, said, in his virtual speech, on Monday that the Fund will be managed independently.
“The Infraco Fund will help to close the national infrastructural gap and provide a firm basis for increasing national economic productivity and growth,” the President explained.
Speaking on the rising inflation rate, he said to reduce the impact of inflation on Nigerians, the Federal Government, through the 2020 Finance Bill, has proposed to exempt minimum wage earners from paying Personal Income Tax.
He said, “We are proposing in the new Finance Act that those who earn minimum wage should be exempted from paying income tax.
“These provisions which complement the tax breaks given to small businesses last year will not only further stimulate the economy, but are also a fulfilment of promises made to take steps to help reduce the cost of transportation and the impact of inflation on ordinary Nigerians.”
The President added it was obvious that Nigeria must diversify from crude oil, speed up investment in infrastructure and improve human capital investment.
“Above all, our economy must be made more resilient to exogenous shocks,” he said.
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