$3.5bn Chinese Loan Not Tied To Assets

By Fola James

The Nigerian Debt Management Office, DMO has allayed fears that critical state assets were used as collateral for loans obtained from China.

The National Assembly, had during the week, approved President Muhammadu Buhari’s $5.8 billion loan request, a substantial part of which is expected to be obtained from the Peoples’ Republic of China.

The debt office disclosed this amidst fears among well meaning Nigerians that the Chinese government may take over some assets if the federal government failed to service debt owed the communist nation.

It was recently reported that China took over the only International Airport in Uganda, after the East African nation failed to service a $200 million loan obtained by the President Youweri Mosevini sit-tight administration.

But in an interview on Saturday with the News Agency of Nigeria, NAN, the Director General of the DMO, Patience Oniha, who put the Nigeria’s total liability to the Chinese government at $3.59 billion, said the loans were largely concessional, as no national asset attached as collateral.

The DMO boss said Chinese loans to Nigeria constitute only 9.4 per cent of the country’s total foreign debt stock of $37.9.

According to her, “Nigeria’s total debt stock as at Sept. 30 was 37.9 billion dollars, this figure comprised the external debt stock of the Federal Government, 36 state governments and the Federal Capital Territory.

“But total loans from China stands at 3.59 billion dollars, which is 9.47 per cent of the total external debt. The loans did not require any national asset as collateral; they were largely concessional,’’ she said.

She further stated that all the loans obtained followed due process and tied to project that will benefit many Nigerians, describing reports that China will take over Nigeria’s asset, in the case of loan default as false and speculative.

“Before any foreign loan is contracted, including the issuance of Eurobond, they are approved by the Federal Executive Council and thereafter, the National Assembly.

“An important and extremely critical step is that the loan agreements are approved by the Federal Ministry of Justice. An opinion is issued by the Attorney-General of the Federation and Minister of Justice before the agreements are signed.

“Several measures which operate seamlessly have been put in place to ensure that data on debt are available and that debt is serviced as at when due. Provisions are made explicitly for debt service in the annual budgets,’’ Oniha said.

The DMO boss further explained that parties to loan agreement have many options of dispute resolution before opting for arbitration.

“The first action is that the parties should resolve it within themselves and if that fails, they go to arbitration. “In other words, a lender, in this case, China, would not just pounce on an asset at the first sign of a dispute, including defaults,’’ she said.

Last month, Uganda’s Finance Minister, Matia Kasaija, apologised to the country’s parliament for the “mishandling of the $207 million loan” from the China Exim Bank to expand Entebbe International Airport, after the Chinese government seized the airport, believed to have been used as security for the loan obtained in November 2015. The Chinese government, in a response to the outrage that greeted the matter, said the loan agreement with Uganda was not signed in duress.