Following the worrisome revelation that Ugandan Government will soon lose several assets to China, including their international airport and key national assets over loan default, OHAFIA TV News took time to investigate the risk Nigeria faces about her increasing loans from China which now stand at $3.121bn to be repaid in 20years with 7years grace period.
Although the Federal Government has been mostly secretive about the terms of the agreement of its China loans, the Debt Management Office made some statements on them in recent times.
In a statement in June 2020, the DMO said, “The total borrowings from China of $3.121bn as at March 31, 2020, are concessional loans with interest rates of 2.5 per cent per annum, the 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.
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.
Eleven projects, ranging from the water supply, power generation, railways, airport terminals, communication to agricultural processing are funded by the loans acquired.
The Director-General, DMO, Patience Oniha, had in February said, “So far, let’s be very clear that there has not been any default, whether of local or international debt.”
The earliest of the funding agreements between Nigeria and China was signed in 2010 with an interest rate of 2.5 per cent yearly, a repayment period of about 20 years and a grace period of seven years.
If Nigeria is unable to pay its first debt by 2038, the country may have to lease out any of the Chinese-funded projects in Nigeria to China.
The first loan project was for the Nigerian national public security communication system project with $399.50m agreed on December 20, 2010, and disbursed.
The second loan was for the Nigerian railway modernisation project (Wu- Kaduna section) with $500m agreed on December 20, 2010, and disbursed.
While the third loan was for the Abuja light rail project with $500m agreed on November 7, 2012, and disbursed, the fourth loan was targeted at the Nigerian ICT infrastructure backbone project with $100m agreed on January 5, 2013, and disbursed.
The fifth loan was meant for the Nigerian four airport terminals’ expansion project (Abuja, Kano, Lagos and Port Harcourt) with $500m agreed on July 10, 2013, but $455.28m was disbursed, which is 91.06 per cent of the agreed amount.
The sixth loan was for the Nigerian Zungeru hydroelectric power project with $984.32m agreed on September 28, 2013, but only $518.24m was disbursed, which is 52.65 per cent of the agreed amount.
The seventh loan was for the Nigerian 40 parboiled rice processing plants project (Federal Ministry of Agriculture and Rural Development), with $325.67m agreed on April 26, 2016, but nothing was disbursed.
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The eighth loan was for the Nigerian railway modernisation project (Lagos – Ibadan section), with $1.27bn agreed on August 18, 2017, but only $759.84m was disbursed, which is 17.50 per cent of the agreed amount.
The ninth loan was targeted at the rehabilitation and upgrading of the Abuja-Keffi-Markurdi road project with $460.82m agreed on August 18, 2017, but only $80.64m was disbursed, which is 59.96 per cent of the amount agreed.
The 10th loan was meant for the Nigeria supply of rolling stocks and depot equipment for the Abuja light rail project with $157m agreed on May 29, 2018, but nothing was disbursed.
Lastly, the 11th loan was for the Nigeria greater Abuja water supply project with $381.09m agreed on May 29, 2018, but nothing was disbursed.
In terms of repayments, Nigeria paid $102.68m to China in the first six months of 2021, while it still owes about $3.48bn
Nigeria also paid a total of $102.68m to the Exim Bank of China in the first half of this year.
Nigeria paid an interest fee of $42.54m, which is 73.76 per cent of the principal fee of $57.67m as debt service to the Exim Bank of China in the first three months of 2021.
Alongside commitment charges of $1.98m, Nigeria paid a total of $102.20m.
In the second quarter of 2021, Nigeria paid an interest fee of $306,050, without paying the principal fee, as debt service to the Exim Bank of China in the second three months of 2021
Alongside commitment charges of $170,680, Nigeria paid a total of $476,730 in Q2 2021.
Nigeria has so far spent $591.11m in five years on servicing the debts owed to the Exim Bank of China.
Nevertheless, Nigeria still owes China $3.48bn as of the end of June 2021.