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In Six Years Buhari’s Administration Borrowed $2.02B From China

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Muhammadu Buhari

According to data obtained from the Debt Management Office, Buhari’s administration has borrowed a total of $2.02 billion in loans from China since 2015 till date.

The Statistics obtained from DMO also revealed that Nigeria’s total debt from China as of 30th of June 2015 stood at $1.38 billion.

As of 31st of March 2021, the country’s total debt portfolio with China has surged to $3.40 billion.

According to the DMO, loans from China are concessional loans with interest rates of 2.50 percent per annum, a tenor of 20 years and a grace period (moratorium) of seven years.

The debt office said that the terms of the loans were compliant with the provisions of Section 41 (1a) of the Fiscal Responsibility Act, 2007.

The loans from China are tied to projects. The projects, (eleven in number as of March 31, 2020), include the Nigerian Railway Modernisation Project (Idu-Kaduna section), the Abuja Light Rail Project, Nigerian Four Airport Terminals Expansion Project (Abuja, Kano, Lagos, and Port Harcourt), Nigerian Railway Modernisation Project (Lagos-Ibadan section) and the Rehabilitation and Upgrading of Abuja-Keffi-Makurdi Road Project.

The DMO revealed that the low interest rates on the loans reduced the interest cost to the government while the long tenor enabled the repayment of the principal sum of the loans over many years.

Since the third quarter of 2015, the nation’s total debt service payment made to China stood at $719.61 million as of 31st of March. $332.03 million or 46.15 percent of the total debt service was paid to service the interest on the loans.

In the first quarter of 2021, $102.19 million was used to service debt to China. This is about 11 percent of the total $1.0 billion used to service external debts within the period.

The DMO recently disclosed that Nigeria had more than $5.83 billion foreign loans that had been approved but not yet disbursed as of December 31, 2020.

Out of this amount, $1.25 billion is supposed to come from the Export-Import Bank of China. Apart from multilateral agencies, China has remained the nation’s largest creditor.

There had been fears among Nigerians that the country may forfeit some of the projects in case of loan defaults.

The fear grew when the Minister of Transportation, Rotimi Amaechi, in August 2020, confirmed that the country waived its sovereign immunity to obtain Chinese loans.

The minister, however, added that as long as debts were repaid, there would be no need for China to claim any infrastructure.

“We must learn to pay our debts and we are paying, and once you are paying, nobody will come and take any of your assets,” he had said.

Despite the assurance, fear persists that the Chinese loans contain some obnoxious clauses that could breach the nation’s sovereignty especially as the loan agreements are not available in the public domain.

Amaechi denied knowledge of any clause that hands over a national asset to China in case of any default in an AriseTV interview on Monday.

When asked about the plans of the Federal Government to pay back the loans so as to avoid the Zambian experience where some national assets such as the Kenneth Kaunda International Airport, the Zambia National Broadcasting Corporation and the National Power and Utility Company were reportedly used to settle Zambia’s financial obligations to China, Amaechi said borrowers should meet their obligations.

He said, “When you take loans, you are expected to pay back. Today we are paying back. Under the regime of President Goodluck Jonathan, the loan for Abuja-Kaduna was taken. It was about $500m. Today, we have paid about $150m on that loan.

“Nigeria has never defaulted when it comes to repayment. I do not also expect that we should default on any other loan that we have taken.”

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Economy

IMF Staff Completes Virtual Mission to Lesotho

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IMF

Lesotho has been struggling with the fallout from the pandemic and a sharp decline in revenues from the Southern African Customs Union (SACU); The authorities and the mission team made significant progress in their discussions on policies that could be supported by the IMF under a financial arrangement.

A team from the International Monetary Fund (IMF), led by Mr. Aqib Aslam, conducted a series of virtual missions, most recently from September 7 to October 15, 2021, to discuss the authorities’ economic and financial program and their request for IMF financial support.

The authorities and the mission team had productive discussions on policies that could be supported by the IMF under a financial arrangement. The program under discussion would aim to support a durable post-pandemic recovery, restore fiscal sustainability, strengthen public financial management, and ensure the protection of the most vulnerable. Other key structural reforms to be implemented include strengthening governance and fostering private sector investment to spur inclusive growth and employment over the medium term.

At the end of the visit, Mr. Aslam issued the following statement:

“Lesotho has been experiencing twin economic shocks resulting from the pandemic and a decline in revenues from the Southern African Customs Union (SACU) that have proved to be highly volatile. Public expenditures have been increasing while SACU revenues were buoyant but have not adapted to their decline and the limited growth in other revenue sources. At the same time, the economy has been in recession since 2017. The resulting fiscal and external imbalances, if left unaddressed, would continue to put pressure on international reserves and lead to government payment arrears.

“Discussions emphasized the need to support a robust and inclusive post-pandemic recovery. To this end, the mission discussed with the authorities a number of options for containing the fiscal deficit to a level that is sustainable and can be fully financed. The team noted that the adjustment should be focused on expenditure measures while boosting poverty-reducing social spending to protect the most vulnerable. Complementary actions include efforts to broaden financial access and inclusion; strengthen financial supervision; modernize the legal frameworks for bank lending, business rescue, and restructuring, and digitalize payment systems.

“On the fiscal front, efforts should focus on addressing the public sector wage bill, which is one of the largest in the world compared to the size of the economy; saving on public sector and official allowances; better targeting education loans; streamlining the capital budget and initiating gender-responsive budgeting. Discussions also considered measures to modernize tax policy and improve domestic revenue mobilization. The mission noted the need to address long-standing PFM issues to ensure the provision of reliable fiscal data, the integrity of government systems, and the sound use of public resources.

“Significant progress was made during the visit, and discussions will continue in the coming weeks. If agreement is reached on policy measures in support of the reform program, an arrangement to support Lesotho’s economic program would be proposed for the IMF Executive Board’s consideration.

“The IMF team thanks the authorities for their hospitality and constructive discussions.”

The IMF mission met with Prime Minister Majoro, Minister of Finance Sophonea, Central Bank Governor Matlanyane, and other senior government officials. The team also met with representatives of the diplomatic community, private sector, civil society, and multilateral development partners.

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Nigeria’s Inflation: Prices Increase at Slower Pace in September 2021

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Consumer Confidence

Prices of goods and services moderated further in Africa’s largest economy, Nigeria in the month of September 2021, the latest report from the National Bureau of Statistics (NBS) has revealed.

Consumer Price Index (CPI), which measures the inflation rate, grew at 16.63 percent year-on-year in September, slower than the 17.01 percent rate achieved in the month of August.

On a monthly basis, inflation rose by 1.15 percent in September 2021, representing an increase of 0.13 percent from 1.02 percent filed in August 2021.

Food Index that gauges price of food items grew at 19.57 percent rate in the month, below the 20.30 percent rate recorded in August 2021.

The increase in the food index was caused by increases in prices of oils and fats, bread and cereals, food product N.E.C., fish, coffee, tea and cocoa, potatoes, yam and other tuber and milk, cheese and egg.

However, on a monthly basis, the price of food index rose by 0.20 percent from 1.06 percent filed in August 2021 to 1.26 percent in September 2021.

The more stable twelve months average ending in September 2021 revealed that prices of food items grew by 0.21 percent from 20.50 percent in August to 20.71 percent in September.

Prices of goods and services have been on the decline in Nigeria in recent months, according to the NBS. However. on masses are complaining of the persistent rise in prices of goods and services across the nation.

Some experts attributed the increase to Nigeria’s weak foreign exchange rate given it is largely an import-dependent economy.

 

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Economy

Global Debt Rises by $27 Trillion to $226 Trillion in 2020 – IMF

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IMF - Investors King

The pandemic has led to an unprecedented increase in debt—issued by governments, nonfinancial corporations, and households the IMF estimated in the latest Fiscal Monitor report. In 2020 global debt reached $226 trillion and increased by $27 trillion, the IMF estimated Wednesday  (October 13) in Washington, DC.

High and growing levels of public and private debt are associated with risks to financial stability and public finances, said Vitor Gaspar, Director of the IMF’s Fiscal Affairs Department.

“According to preliminary estimates from the Global Debt Database, global debt by governments, households, and non-financial corporations reached $226 trillion. That represents an increase of $27 trillion relative to 2019. Both the level and the pace of increase are record highs. We know that high and rising debts increase risks to financial stability and public finances,” Gaspar said ahead of the Fiscal Monitor release.

Gaspar emphasized that countries with a high credibility fiscal framework benefit from better bond market access. They also experience lower interest rates on sovereign bonds.

“A strong message from the fiscal monitor is that fiscal credibility pays off. Countries that have credible fiscal frameworks benefit from better and cheaper access to bond markets. That’s a precious asset to have in an uncertain and difficult times like COVID 19. Fiscal credibility pays off!,” added Gaspar.

He also recognized that while the international community has provided critical support to alleviate fiscal vulnerabilities in low-income countries, still more is needed.

“In 2020, the IMF’s rapid financing and the G20 Debt Service Suspension Initiative contribute to make resources available to the countries that need it the most. But more is needed. With a general allocation of SDRs of $650 billion, liquidity has been provided, but much more could be achieved if rich countries would make part of their resources available to the developing world. By doing so, donors would be contributing to fighting the pandemic and to the achievement of sustainable and inclusive growth,” said Gaspar

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