President Muhammadu Buhari said Chinese loans to Nigeria were not “debt trap” as being purported, noting that the nation was able to repay all the loans as and when due.
This was contained in a statement on Tuesday by the Senior Special Assistant to the President on Media and Publicity, Garba Shehu.
According to the statement, President Buhari was dispelling insinuations on how the Asian nation could be putting Nigeria under a massive debt through its financial support.
It said Nigeria’s partnership with China has resulted in the execution of critical infrastructure projects valued at more than $5 billion over the last three years.
It added that the projects being funded were perfectly in line with Nigeria’s Economic Recovery and Growth Plan (ERGP), adding that “some of the debts incurred are self-liquidating.”
“Let me use this opportunity to address and dispel insinuations about a so-called Chinese ‘debt trap’. We have completed and flagged off West Africa’s first urban rail system, valued at $500 million, in Abuja. Before then was the 180km rail line that connects Abuja and Kaduna, completed and commissioned in 2016, and running efficiently since then,” the statement read.
Buhari said Nigeria was leveraging Chinese funding to execute $3.4 billion worth of projects at various stages of completion, including upgrading of airport terminals, the Lagos – Kano rail line, Zungeru hydroelectric power project, and fibre cables for the country’s internet infrastructure, among others.
“Less than 3 months ago, Nigeria signed an agreement for an additional $1billion loan from China for additional rolling stock for the newly constructed rail lines, as well as road rehabilitation and water supply projects,” it added.
Two days ago, the presidential spokesman in a separate statement had said the two nations would sign a $328 million agreement on the National Information and Communication Technology Infrastructure Backbone Phase 11 (NICTIB 11) at the 2018 Beijing Summit of the Forum on China-Africa Cooperation (FOCAC).
On Monday, 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.
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.
The Federal Government said states owing workers’ salaries would not have access to the remaining $2.69 billion Paris Club refund.
It said such states must clear backlogs of salaries and other related staff arrears to get approval for the funds, which would be made in phased tranches to the states.
The Director of Information, Federal Ministry of Finance, Hassan Dodo, made this known in a statement on Tuesday.
According to Dodo, “The Debt Management Office (DMO) led the reconciliation process under the supervision of the Federal Ministry of Finance. The final approval of 2.69 billion dollars is subject to some conditions.”
The conditions given to the state governments before the fund could be accessed, according to the statement, include; “Salary and staff related arrears must be paid as a priority; Commitment to the commencement of the repayment of Budget Support Loans granted in 2016, to be made by all States.”
Others include, “Clearing of amounts due to the Presidential Fertiliser Initiative, Commitment to clear matching grants from the Universal Basic Education Commission (UBEC) where some States have available funds which could be used to improve primary education and learning outcomes.”
The issue of Paris Club loan over-deduction had been a long standing dispute between the Federal Government and the State Governments, dating back to 1995.
Responding to the dispute, President Muhammadu Buhari had directed that the claims of over-deduction should be formally and individually reconciled by the DMO. This reconciliation commenced in November 2016.
As an interim measure to alleviate the financial challenges of the states during the 2016 recession, the President had, between 1st December, 2016 and 29th September, 2017, approved that 50 percent of the amounts claimed by states be paid to enable the states clear salary and pension arrears.