[EXCLUSIVE] Facts about the Nigerian Chinese Loans | MUST READ

By Chukwuemeka Chukwueke

As people continue to express negative feelings over the huge Nigerian Chinese loans, the Debt Management Office (DMO) has ruled out any form of concerns over Nigeria’s indebtedness to China, declaring that Chinese loans are not only project-tied but also configured to be concessional.

The agency has also assured that Nigeria has not defaulted in its debt service obligations, both at the domestic and external scenes.

In an interview held last night with ARISE NEWS Channel, the DMO Director General, Ms. Patience Oniha noted that all the loans from China are project-tied and concessional, adding that servicing such loans had not constituted problems.

According to her, the Chinese loans, which amounted at about N3.2 trillion constituted just about 11 per cent of total external debt stock.

She said: “I know that last year, there was a lot in the public space about borrowings from China. All of the loans we have from China–the stock of bilateral credit (which is where China belongs) is low relative to the total public debt stock.

“Loans from China are about N3.2 trillion which was about 11 per cent of total external debt. Okay, that was small. But to add, those are all concessional loans. No reasons to be worried about them. They are all project-tied, which Nigerians should be happy about.

“You can see all the physical infrastructure – whether it is the airports or the rail lines or the roads; you can see them. So, we don’t see any reasons for concerns, and they are all project-tied and concessional.

“There was a lot of debate in terms of sovereign immunity and all of that, but we did get proper interpretations, both from China and the Ministry of Justice and we also as DMO, we have facts behind China loans on our website way back in June 2020. So, we are not worried about them. They are all project-tied and are concessional.”

On whether the current public debt of about N33 trillion is sustainable, Oniha noted that in terms of debt-to-GDP, it was sustainable, adding that the challenge was debt service-to-revenue.

Oniha noted that some countries have had problems with servicing their external debt, which has not been the case with Nigeria.

She said Nigeria redeemed the Eurobond that matured on January 28, 2021, assuring that the country is committed to servicing it’s debt obligations for several reasons.

On whether the DMO is considering issuing longer tenor debt instruments, Oniha said doing so is a function of consultations with investors.

According to her, the agency has a fairly diverse portfolio of investors, adding that the banks are typically at the short end.

She added pension funds and then the assets and fund managers who have become extremely significant in deciding on debt the type of instruments and tenor .

“So, we have those discussions with them before we extend any tenor because in reality we are offering a product and for that product to be successful, not just one time but on a continuous basis. So, we consider those discussions with them before we extend any tenor. If you remember, we introduced the 25 years bond, then after that, the 30 years because the longer term investors wanted something between 25 and 30 years.

“Let’s say that we are open to considering something more than 30 years. But we need to discuss with stakeholders because liquidity is important, not just that we just want to raise funds, but we need to also ensure that there is liquidity so that we can continue issuing it. That is the only basis investors will buy these securities. I won’t commit to tenor,” she pointed out.

The DMO DG who also spoke on foreign exchange problems vis-a-vis investment in government securities, stated that the Central Bank of Nigeria (CBN) is aware and was addressing them.

She recalled that a few years back, there were both an active FX securities market and an active FX market, which helped to keep both the FX securities and FX market moving.