Chinese loan to Nigeria increases by $800m in one year

Chinese loan to Nigeria increases by $800m in one year
Chinese loan to Nigeria increases by $800m in one year

According to recent data from the Debt Management Office (DMO), Nigeria’s debt owed to China has increased significantly, rising from $3.93 billion as of June 30, 2022, to $4.73 billion as of June 30, 2023.

This marks an 20.36% increase in just one year, with the figures obtained from an analysis of external debt stock data.

While the terms of Nigeria’s loans with China have often been kept confidential, the DMO provided some insights in a statement back in June 2020.

They stated that the borrowings from China at that time, totaling $3.121 billion, were concessional loans with favorable terms, including an interest rate of 2.5% per annum, a 20-year tenor, and a seven-year grace period (moratorium).

These terms align with the provisions of the Fiscal Responsibility Act of 2007, which aim to ensure that loans have manageable conditions.

The low interest rate on these loans reduces the financial burden on the Nigerian government, while the extended tenor allows for the gradual repayment of the principal amount over an extended period.

These Chinese loans have been allocated to various projects in Nigeria, ranging from infrastructure development to technological initiatives.

Despite the significant amount borrowed from China, Nigeria has not experienced significant inflows of foreign currency into the local education sector, creating a financial gap.

This surge in Chinese debt is raising concerns, particularly given the risk of asset forfeiture in the event of loan default.

To address these issues, Nigeria will need to closely monitor its growing debt obligations and explore strategies for debt management.

The United States has also expressed concerns regarding China’s potential influence on the Nigerian government through these loans, suggesting that the terms may not always be as favorable as they appear.

China’s involvement in Nigerian infrastructure projects, especially in the railway sector, has been a subject of interest, with the Chinese Civil Engineering Construction Corporation (CCECC) taking on significant railway projects in Nigeria.