Nigeria’s Debt to China Surges by $800 Million in One Year, Reaching $4.73 Billion

Nigeria’s debt to China has risen from $3.93 billion as of June 30, 2022, to $4.73 billion as of June 30, 2023, reflecting an increase of $800 million in just one year.

This signifies a notable 20.36% surge from the second quarter of 2022 to the second quarter of 2023, based on an analysis of external debt stock data provided by the Debt Management Office (DMO).

While the Nigerian government has remained largely discreet about the specifics of its loan agreements with China, the DMO has shared some insights into these arrangements in the past.

In a statement in June 2020, the DMO indicated, “The total borrowings from China, amounting to $3.121 billion as of March 31, 2020, comprise concessional loans with interest rates of 2.5% per annum, a tenor of 20 years, and a grace period (moratorium) of seven years.”

The DMO clarified that these terms align with the provisions of Section 41 (1a) of the Fiscal Responsibility Act, 2007. The low interest rate helps reduce the government’s interest expenses, while the extended repayment period allows the principal sum of the loans to be paid off over many years.

In a document titled ‘Status of Chinese loans as at September 30, 2021,’ the DMO disclosed that 15 projects were financed with loans from China. These projects encompass various sectors, including water supply, power generation, railways, airport terminals, communication, and agricultural processing.

The loans are characterized by varying terms, interest rates ranging from 2.5% to 3%, and are not exclusively fixed at 2.5% as previously stated by the DMO in June 2020.

Regarding repayments, during the period under review, Nigeria serviced Chinese loans with $263.14 million.

However, external debt service reports suggest that Nigeria is not obligated to make any payments in the second quarter, as no debt service payments were recorded for Chinese loans in Q2 of both 2022 and 2023.

Concerns have emerged that Nigeria may risk forfeiting assets if it defaults on these loans. The Director-General of the DMO, Patience Oniha, assured in 2021 that the loans were largely concessional, and no national assets were pledged as collateral.

The United States expressed apprehension about China’s potential influence over the Nigerian government through these loans. A document by the US Department of State noted that China was offering sub-prime financing for various infrastructure projects in Nigeria, potentially increasing Chinese influence in the country.

China has played a significant role in funding numerous railway projects in Nigeria. One Chinese company, the China Civil Engineering Construction Corporation, handled the majority of these projects.

While China has become somewhat reluctant to extend further loans to Nigeria, recent amendments to the relationship between the two nations have seen the Chinese government committing to refinance and complete major railway projects in Nigeria.

These projects had experienced delays due to funding constraints, with Nigeria having paid its share of the financing. China had pledged to provide 85% financing for the construction of these projects, while Nigeria was responsible for the remaining 15%. However, China had yet to disburse the funds needed for these significant railway projects.

During a bilateral meeting between the President of the People’s Republic of China, Xi Jinping, and a Nigerian delegation led by Vice President Kashim Shettima, held at the Third Belt and Road Initiative Forum, China pledged to refinance and finalize the Abuja-Kano and Port-Harcourt-Maiduguri railway projects. Jinping also expressed the need to protect Chinese nationals working in Nigeria.