Everyone is concerned about the debt Nigeria owes China, with a feeling that it is off the charts. Nigeria and China have had diplomatic ties since 1971. Trade and investment have grown since then, and so has lending too.
The public is concerned that the debt Nigeria owes to China might be risking its sovereignty, so it’s a growing concern that is always in the limelight. We will provide you information on the size of the current debt owed to China and Nigeria’s debt in total, so you can get an overview of Nigeria’s indebtedness.
How Much is Nigeria Owing China?
The most recent official data available is from December 2020. Nigeria’s public debt was N32.9 trillion ($86.3 billion). This data was presented by the debt management office.
External debt was N12.7 trillion ($33.3 billion), and it was all contracted by the federal government. Out of this amount, N1.2 trillion ($3.3 billion) or 9.7% was owed to the Export-Import Bank of China. This bank is state-owned and it’s the bank that supports China’s foreign trade and investment.
Domestic debt including loss by banks was N20.2 trillion ($53 billion). Out of this amount, N16 trillion ($42 billion) is owed by the federal government, while the remaining are loans by state governments and the federal capital territory Abuja.
The debt Nigeria owes to China is 80.1% ($3.1 billion) of bilateral debt. Bilateral debt in this sense means debt loaned by one state to another state. Apart from China, other countries (Japan, France, India, Germany) have lent Nigeria money.
The debt Nigeria owes to international financial institutions (multilateral debt) such as the World Bank, African Development Bank, and the International Monetary Fund was slated at $17.9 billion.
This is an overview of all the debts Nigerian owes. Out of all the debts, Nigeria owes China $3.1 billion.
Why is Nigeria Applying for Loans?
For us to be getting such huge loans it’s necessary we all know what they are for.
The loans Nigeria is getting from China are concessional. This means China is giving Nigeria these loans at generous terms than market loans.
The loan is used in funding 11 projects, according to the debt office. These projects range from power and railways, water supply, communications, airport terminals, agricultural processing.
In a February 2021 media interview. Patience Oniha, who heads the debt office assured Nigerians that the loans were concessional and all tied to projects. The statement goes thus “Those are all concessional loans and there are no reasons to be worried about them, they’re all project-tied which I think Nigeria should be happy about,”
Since When Has Nigeria Been Collecting Loans From China?
In total, Nigeria has requested $5.6 billion in loans from China. As of March 2020, $3.3 billion has been disbursed by Beijing and Nigeria is already servicing the loan.
The year 2010 was when the earliest loan agreement was signed, and May 2018 is the most recent. These debts all have interest rates of 2.5% per year, the loan grace period is 7 years and the repayment window is 20 years. The earliest maturity date of these loans is September 2030, and March 2038 is when the last loan is to be paid.
How Is Nigerian Managing Her Debts?
The debt Nigeria owes to China increased by 136% between September 2015 and September 2020, as seen in official figures. This means it increased from $1.4 billion to $3.3 billion. May 2015 was when Buhari started his first term.
Within that period, external debt grew from $10.6 billion to $32 billion. The debt management office came out and said the country would not default on its loans. This was said in a statement in 2020.
In 2020, Nigeria spent $195.5 million as payment of its debt to China, which is about 12.6% of the $1.6 billion spent on servicing all its external debt.
Is Nigeria Getting More Loans?
In February 2021, the Nigerian government said it had increased how much public debt it could incur, from 25% to 40% of its gross domestic product (GDP).
The aim of this increase is to help budget deficits and other “obligations” of government. The debt office added that the new debt-to-GDP ratio is “still well below the World Bank and IMF’s recommended threshold of 55% for countries in Nigeria’s peer group”.
Nigeria has always been collecting loans from China. This is something that has happened for so many years, and the fear of Nigerians that the country might have lost its sovereignty is justified. With such huge reliance on China for loans, Nigeria might be at the risk of economic colonization.
Apart from collecting loans, we also need to know about the plans the government has put in place for the projects the loans are tied to. This will create transparency, and we hope in months to come our government will give us more information.