Nigeria’s Debt to China Surges by $800 Million Amidst Economic Challenges

Nigeria’s debt to China has increased from $3.93 billion as of June 30, 2022, to $4.73 billion as of June 30, 2023, representing a $800 million year-over-year increase, according to a comprehensive analysis of external debt stock data from the Debt Management Office.

This surge translates to a significant growth of 20.36% from the second quarter of 2022 to the same period in 2023, reflecting the nation’s increasing indebtedness to China.

While the Federal Government has maintained secrecy regarding the terms of its loans from China, the Debt Management Office (DMO) has previously disclosed some key details.

In June 2020, the DMO disclosed that the borrowings from China had hit $3.121 billion as of March 31, 2020, comprised of concessional loans with a 2.5% annual interest rate, a 20-year tenor, and a seven-year grace period (moratorium).

The DMO emphasized that these terms align with the provisions of Section 41 (1a) of the Fiscal Responsibility Act, 2007.

Also, these favorable conditions reduce interest costs for the Nigerian government, and the extended tenor facilitates repayment over an extended period.

Moreover, the DMO’s document titled ‘Status of Chinese Loans as of September 30, 2021′ unveiled that 15 projects across various sectors, including water supply, power generation, railways, airport terminals, and communication, were funded by loans from China.

However, as per the document, some of these projects did not progress as expected. Notably, the loan intended for the Nigerian 40-parboiled rice processing plants project received approval but did not see any disbursement.

Although concerns loom regarding the potential risk of asset forfeiture in the event of loan defaults, the Director-General of the DMO, Patience Oniha, asserted that the loans are largely concessional, with no national assets serving as collateral.

The United States has expressed concerns about Chinese loans’ influence on the Nigerian government, suggesting that the financial arrangements could unduly increase Nigeria’s debt burden and enhance Chinese influence.

While China has played a dominant role in Nigeria’s railway projects, including the Lagos-Calabar coastal railway, it had become more reluctant to extend additional loans to Nigeria.

The Chinese government has recently expressed its commitment to refinancing and completing the Abuja-Kano and Port-Harcourt-Maiduguri railway projects, potentially indicating a shift in the relationship.

The rise in Nigeria’s debt to China remains a subject of debate amid concerns about the nation’s financial obligations and foreign influence, emphasizing the need for transparency in debt management.