The Debt Management Office, DMO, has assured the public that Nigeria’s public debt is being managed under statutory provisions and international best practice, and there is no risk of default on any loan, including the Chinese loans.
It said claims of a possible seizure of national assets by the Chinese government are unfounded, saying “the possibility of a takeover of assets by a lender does not exist,” pointing out that “government’s borrowing in the Domestic and External markets, including Chinese loans are all backed by the full faith and credit of the government, rather than a pledge of the government’s assets.”
Borrowing from China, the DMO emphasised, “should not be seen from a negative perspective as they are being used to finance Nigeria’s infrastructural development at concessional terms. Moreover, China Exim Loans are only one of the sources of multilateral and bilateral loans accessed by Nigeria and represented only about 8.5% of Nigeria’s External Debt as at June 30, 2018.”
Government’s borrowing from China the DMO said “is based on need, and subject to the receipt of requisite approvals, the Government may 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 sources, the DMO noted “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.”
Prudent management of the public debt the nation’s debt managers said “implies that, the Government should avail itself of the opportunity to access concessional loans which deliver twin benefits of being more cost efficient and supporting infrastructural development.”
Loans from Concessional Lenders have limits in terms of the amounts that they can provide to each country. This makes it necessary for Nigeria to have several sources for accessing concessional capital to increase the total amount available and also, to avoid undue dependence on only a few sources of concessional funds.
The DMO added that “borrowing from China Exim is one of such means of ensuring that Nigeria has access to more long term concessional loans. Given the country’s infrastructure deficit, which needs to be urgently addressed, the loans from China Exim, which provide financing for critical infrastructure in Road and Rail Transport, Aviation, Water, Agriculture and Power at concessional terms, are appropriate for Nigeria’s financing needs and align properly with the country’s Debt Management Strategy.”
Nigeria’s Public Debt the statement said “remains sustainable and there is also no risk of default because of Nigeria’s sound Debt Management practices.”
Following the recent summit of the Forum on China-Africa Cooperation (FOCAC) Nigeria secured a facility for the National Information and Communication Technology Infrastructure Backbone Phase 11 (NICTIB 11) between Galaxy Backbone Limited of Nigeria and Huawei Technologies Limited (HUAWEI) of China at the cost of US $328 million. The facility is provided by the Chinese EXIM Bank.
The DMO insisted that with regards to external borrowing, the Nigerian Government accesses capital from several sources – Multilaterals, such as the World Bank and the African Development Bank, as well as, Bilateral loans from various countries such as France (through the Agence Francaise de Development -AFD), Germany (KfW), Japan (Japan International Cooperation Agency – JICA), India (India Development Bank) and China (China Export-Import Bank – EXIM). These loans from Multilateral and Bilateral lenders are typically used to finance specific capital projects across the country. The International Capital Market is another source of capital.