The Debt Management Office (DMO) has debunked reports claiming that China is now the major source of funding for the Nigerian Government.
According to the DMO, the total value of loans taken by Nigeria from China as at March 31, 2020, was $3.121 billion, representing only about 3.94% of Nigeria’s total public debt of $79.303 as at March 31, 2020.
The DMO also disclosed that the loans are concessionary loans, with interest rates of 2.5% per annum, tenor of 20 years, and a moratorium of 7 years.
“The $3.121 Chinese loans are project-tied loans. Some of these 11 projects as at March 31, 2020, are Nigerian Railway Modernization Project (Idu-Kaduna section), Abuja Light Rail Project, Nigerian Four Airport Terminals Expansion Project (Abuja, Kano, Lagos and Port Harcourt), Nigerian Railway Modernization Project (Lagos-Ibadan section), and Rehabilitation and Upgrading of Abuja-Keffi- Makurdi Road Project.
As stated by the DMO, the impact of these loans is not only evident but visible. For instance, the Idu-Kaduna Rail line has become a major source of transportation between Abuja and Kaduna.
It also said the principal process and requirements for borrowing by the Government are expressly stated in the Debt Management Office Establishment (ETC) Act, 2003 (DMO Act) and the Fiscal Responsibility Act, 2007.
In summary, the Federal Ministry of Finance, Budget and National Planning works with MDAs under whose portfolio a proposed loan falls and also with the DMO. Thereafter, the approval of the Federal Executive Council (FEC) is sought.
“The loan agreements are reviewed by legal officers of the Federal Ministry of Justice and the legal opinion of the Attorney General of the Federation and Minister for Justice is obtained before any external loan agreement is signed.
The DMO points out that Nigeria explicitly provides for Debt Service on its External and Domestic Debt in its Annual Budgets. This means that debt service is recognized and payment is planned for.