Nigeria owes China about $3.1 billion, more than 10% of the $27.6 billion external debt stock. Minister of Finance, Zainab Ahmed, disclosed in February that the Federal Government decided to go for a $17 billion loan from China as the World Bank and the African Development Bank’s (AfDB) failed to show much interest in Nigeria during the recession.
But can Nigeria refund the loan? Experts think otherwise, as they argue that if care is not taken, the nation may fall into the Chinese Debt Trap.
In an interview with Channels TV, the Director of Centre for Infrastructure Policy Regulation and Advancement (CIPRA), Lagos Business School, Dr Bongo Adi, explained that Nigeria lacks accountability, transparency, and responsibility to refund the loans. He noted that when it comes to loans, Nigeria has failed to implement the three factors in its engagement with the Chinese.
According to him, Chinese Exim Bank has offered $6.6 billion to Nigeria and that is quite significant. He said:
“We have to look at the total debt and the capacity to repay not just to China but to our creditors. Our Debt independent revenue is at 96% now. That means for every N1 we earn, 96 kobo is used to refund loan. That has passed a critical threshold.
“What it means is that we lack the ability and we don’t have the headroom anymore to repay because our independent revenue has been strangulated by our enormous debt hanging over the Federal Government as it stands now.”
He also expressed concern that increasing Chinese loan is an indication that the nation has not considered the history of Chinese loans. He said:
“Out of 64 countries that host the Chinese Belt and Road initiative projects, 20 have gone under distress and 8 are about to lose their sovereign debt sustainability if they should take any further loan. If that were supposed to be a good guide, it means Nigeria needs to be very careful when we are borrowing from the Chinese.
“We have seen this Chinese cycle and need to be careful. What normally happens is that the Chinese will begin to take over infrastructure asset, which is what some call Chinese Chopstick Imperialism and the experience is not just pleasant. Chinese strategically tie loans to infrastructure and that is intending to take possession of the infrastructure asset if there is the default, as such asset became their collateral.”
Meanwhile, contrary to the belief of some pro-government pundits that the Abuja-Kaduna rail was a success, a Chartered Accountant, Peter Adebayo, said that It depends on how the success is qualified. He said:
“When you look at the economics of the project, questions have been asked. Minister of Transportation has said in a forum that government subsidised the project by 60%. Now, that the cry all over is for the government to remove subsidy, will the project continue to be sustainable if the subsidy is removed?
“If that is the case, will we be able to repay the debt? What is the impact of all these, we need to be careful. We should look away from PPP and focus on Blended finance. It is a strategic move where you bring in development finance with some philanthropic funds to activate private capital into infrastructure development. Our debt is high and it is a precarious situation for everyone. We cannot do without taking loans but the government has displayed incapacity and incompetence to manage projects.”