The Debt Management Office (DMO) on Tuesday said Nigerians have no reason to panic over Federal Government’s borrowing from China.
It said there is no risk of default on the loans because of the country’s “sound debt management practices.”
The DMO stated this in a statement in Abuja in response to rising criticism of the country’s borrowing culture from China as some Nigerians believed that the Asian country could be putting Nigeria under massive debt through its financial support.
It noted that the comments heightened following the recent summit of the Forum on China-Africa Cooperation (FOCAC).
According to the debt office, it was important for the government to raise capital from several domestic and external sources to finance capital projects, in order to promote economic growth and development, as well as, job creation.
“One of the reasons why Nigeria would raise capital from Multilateral and Bilateral (external) sources is because they are Concessional which means that they are cheaper in terms of costs, and more convenient to service because they are usually of long tenors with grace periods,” it said.
Loans from Concessional Lenders have limits in terms of the amounts that they can provide to each country.
The DMO said borrowing from China Exim Bank is one of such means of ensuring that Nigeria had access to more long term concessional loans.
It said the loan would be used to finance road and rail transport, aviation, water, agriculture and power projects, adding that the terms of the loan were appropriate for the country’s financing needs and aligned with her debt management strategy.
“The public should be assured that Nigeria’s public debt is being managed under statutory provisions and international best practices, and there is no risk of default on any loan, including the Chinese loans.
“Thus, the possibility of a takeover of assets by a lender does not exist.
“For the avoidance of doubt, government’s borrowing in the domestic and external markets, including Chinese loans, are all backed by the full faith and credit of government, rather than a pledge of government’s assets.
“Finally, borrowing from China should not be seen from a negative perspective as they are being used to finance Nigeria’s infrastructural development at concessional terms,’’ DMO said.
Recall that President Muhammadu Buhari had said Chinese loans to Nigeria were not “debt trap” as being purported. According to him, the nation was able to repay all the loans as and when due.
Nigeria and China had signed a $328 million agreement on the National Information and Communication Technology Infrastructure Backbone Phase 11 (NICTIB 11) at the FOCAC Summit.
Last week, China pledged a total of $60 billion financial support for projects in Africa, but noted the funds are not for “vanity projects” but for building infrastructure that can remove development bottlenecks.