Considering rising criticisms against the borrowing spree of the current government from China, the Debt Management Office (DMO) argued that it borrows from China in order to take advantage of a cheaper source of finance.
Recall that National Daily had reported the observations of experts on the Chinese loans, describing it as another form of colonization.
They also said in the agreement, no single dollar cash was handed over to the countries involved. “In all cases, China will execute & build the projects (as is being done in our Abuja metro line project), using Chinese materials, equipment, technicians, etc that are all imported from China,” they argued.
The experts advised the federal government to always be mindful of all terms and conditions attached to Chinese facilities than taking everything nook line and sinker.
However, in a statement issued by DMO, the agency dismissed insinuations of possible takeover of the economy by China in case of failure to repay the borrowed funds, saying that the possibility of failure did not exist.
According to the agency, one of the reasons why Nigeria will raise capital from multilateral and bilateral 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 the prudent management of the public debt 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.
According to the DMO, 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.
“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.”
DMO averred that loans from China Exim constituted just one of the sources of multilateral and bilateral loans accessed by Nigeria and represented only about 8.5 per cent of the country’s external debt as of June 30, 2018.