With over $6.2bn credit facilities to Nigeria, the People’s Republic of China has emerged as the country’s highest creditor, investigations have shown. Although the Debt Management Office listed on its website the nation’s total external debt as at September 30, 2012 as $6.29bn, investigations showed that the country’s indebtedness to China alone stood at over $6.2bn.
This means that most of the country’s debts to China have not been officially captured in the DMO database.
This is because most of the debts were sealed recently by the Federal Government, while the drawdown on some of the recent has yet to begin.
The DMO put Nigeria’s bilateral and commercial loans as of September 30, 2012, under which category the Chinese loans fall, at a paltry $679.22m, but the Chinese loans to the country exceed the amount by over 1,000%.
Encouraged by a generous Chinese attitude towards lending to the country, many ministries, departments and agencies of the Federal Government had in recent times scrambled for Chinese loans in an uncoordinated manner.
This could double or even triple when ongoing negotiations for fresh facilities are finalised in the next one or two years.
Some of the earliest loans obtained by the Federal Government from China included $200m for the rural telephony project and another $200m for the Nigeria Communications Satellite project.
The most recent ones include $500m for the Abuja Light Rail project; $500m for four airport terminals; $100m for the Galaxy Backbone network expansion; $1.04bn for the Zungeru Hydropower project, $2.56bn for the Mambila Hydropower project; $1bn for the modernisation of the Lagos-Kano rail project; and $100m for expansion of connectivity in the MDAs.
The Federal Government had in 2001 signed a Memorandum of Understanding with the Chinese government for the take-off of the rural telephony project aimed at providing connectivity to 218 local government headquarters across the country.
Apart from the $200m loan provided by the Chinese government, the Federal Government also provided 15% counterpart funding. The project was divided into sections that were executed by two Chinese firms, ASB and ZTE.
The second phase of the project expected to cover the local government areas that were left out in the first phase had been billed to gulp $300m, but the controversy that mired the first phase had hampered its take-off.
The Nigerian Communications Satellite project, on the other hand, was executed by the China Great Wall Industry Corporation.
The satellite, which was put in the orbit in May 2007 just before the exit of former President Olusegun Obasanjo, failed 18 months after but was replaced in December 2011.
Chinese firms have been known to come to Nigeria to initiate projects and help the MDAs to obtain financing from their home government through the China Export Import Bank.
However, the Minister of Finance and Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala, while in China to negotiate a $3bn facility alongside some top government functionaries in August 2012, said the Federal Government had taken steps to stop the scramble for Chinese loans and provide a united front in negotiation for loans with the Chinese government.
She had said, “We have noticed a phenomenon where a lot of Chinese companies come to different ministries and agencies with particular projects they are interested in, and when the MDAs say yes, they sometimes go and help negotiate the credit.
“But we want to change this because this approach does not always take into account our priorities. When I say systematisation, it means that we outline what our priorities are and we try to negotiate the same beneficial rate for all our projects so that we have a systematic approach.”
Explaining the attraction of Chinese loan for the airport projects, the Minister of Aviation, Ms. Stella Oduah, had said the facility came with 22-year tenure, a moratorium of five years and an interest rate of two per cent per annum.
Oduah had said in September 2012, “Mobilisation to site by the contractors is expected to commence within 90 days. What this means is that before the end of the lifespan of this administration, we would have been able to bequeath to Nigerians the airports of their dreams. This is a giant and bold step by the present administration to provide Nigerians and the travelling public with airports that truly tell the story of who we are as a nation.
“What we have today is not befitting of us as the giant of Africa; so, we are quite privileged to be given the opportunity to be part of this epoch-making transformation in the aviation sector in Nigeria.”
Similarly, the Minister of Transport, Senator Idris Umar, explained that the Federal Executive Council had approved the $1bn Chinese facility for the modernisation of the Lagos-Kano rail line on July 18, 2012.
The first phase involves the modernisation of the Lagos to Ibadan standard gauge double track, covering a distance of 156.65 kilometres to be executed by a Chinese firm, CCECC Nigeria Limited.
At the signing of the Memorandum of Understanding for the project, Umar had explained, “Under the arrangement, the loan facility to the tune of $1bn is going to be provided by the China EXIM bank. However, negotiation has been concluded with China EXIM bank.
The Managing Director, CCECC, Mr. Cao Bao Gang, said the project would provide 5,000 jobs.
The Zungeru Hydroelectric project will generate 700 Megawatts of electricity; while the Mambilla Hydroelectric project will generate 3,050MW.
In the interim, Mambilla has been projected to cost $3.2bn. The cost of the Zungeru project is put at $1.3bn.
However, officials of the Ministry of Power have given indication that the cost of the Mambilla plant will be reviewed upwards before the project would begin. Our correspondent learnt that the cost of the project could be between $5bn and $6bn.
When the final cost of the project is determined, the Chinese financing arrangement will be reviewed upwards as the Federal Government’s involvement is limited to 15% of project cost.
Other sectors of the economy where negotiations are currently going on for the procurement of additional Chinese loans include agricultural technology, communication technology and road construction in the Niger Delta.
The nation’s growing indebtedness to China represents the Asia giant’s growing influence in the global arena. With huge foreign reserves and a growing economy, China recently replaced Japan as the second largest economy in the world and has the ambition of displacing the United States from the topmost position.
Unlike Nigeria’s huge domestic debt of N6.34tn that was mostly procured to finance budget deficits; all Chinese loans to Nigeria are tied to projects.
The concern of some experts is the quality of some of the projects as well as the Chinese reputation for corruption.
Some of the projects such as the rural telephony project have been ill-conceived, enmeshed in controversy and have had no impact on the citizens.
China, on the other hand, has been using its generosity to wield global influence, create employment opportunities for its huge population of 1.34 billion people and sell its technologies to the global community.
Source: Punch
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