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NIGERIA DEBT TO CHINA ZOOMS, RAISING FEARS OF DEFAULT
- By The Financial District
- Apr 13, 2021
- 2 min read
Oil-rich Nigeria has been borrowing heavily from China, with 80.1% of bilateral debt, or $4.1 billion, coming from Beijing, Allwell Okpi, researcher and community manager for the non-government organization (NGO) AfricaCheck reported for Africa Quartz.
However, of the total external debt of nearly $33 billion, 9.7% or N1.2 trillion ($3.3 billion) was owed to the Export-Import Bank of China, a state-owned and funded bank that supports China’s foreign trade and investment.
Official figures show that Nigeria’s debt to China grew 136% between September 2015 and September 2020, from $1.4 billion to $3.3 billion. External debt in that period also grew from $10.6 billion to $32 billion. The debt management office has said the country would not default on its loans.
Nigeria spent $195.5 million to pay its debt to China in 2020, or about 12.6% of the $1.6 billion it spent servicing all its external debt.
Nigeria is also raising its level of public debt to 40% of the gross domestic product (GDP.) Critics warn that Nigeria may eventually pay its debt to China with oil, as what Iran and Venezuela are currently doing.
In August 2020, transport minister Rotimi Amaechi said Nigeria had waived immunity on a loan—immunity which would have prevented China from taking it to arbitration in the event of a default.
But this did not mean the country had ceded its sovereignty, the government said while the Chinese embassy in Nigeria said “a debate on loans is not the first time it will come up in Nigeria and other African countries. China will never seek hegemony and we are not out to take over any country.”
Nonetheless, China did not help Zambia when it defaulted on its loans and Beijing but a military base in Djibouti when it defaulted on its loans.
“In total, Nigeria has agreed $5.6 billion in loans with China. But as of March 2020, Beijing had disbursed $3.3 billion. With Nigeria already servicing the loans, $3.1 billion was outstanding as of then. The earliest of these funding agreements was signed in 2010, while the most recent dates back to May 2018. They all have interest rates of 2.5% per year, a grace period of seven years, and a repayment period of about 20 years. The earliest maturity date is September 2030, with the last loan to be paid up in March 2038,” Okpi revealed.
