The Debt Management Office (DMO) says recent concerns by Nigerians over the nation’s closer embrace with the Peoples’ Republic of China with regards to taking loans from the later need not arise.
In a statement that was issued yesterday, the debt office said recent loan agreements signed between the countries are purely part of government’s efforts to raise capital from several domestic and external sources to finance capital projects, in order to promote economic growth and development, as well as, job creation.
“The public should be assured that Nigeria’s public debt is being managed under statutory provisions and international best practice, and there is no risk of default on any loan, including the Chinese loans. Thus, the possibility of a takeover of assets by a lender does not exist. For the avoidance of doubt, the government’s borrowing in the Domestic and External markets, including Chinese loans are all backed by the full faith and credit of the government, rather than a pledge of the government’s assets.
“Borrowing from China should not be seen from a negative perspective as they are being used to finance Nigeria’s infrastructural development at concessional terms. Moreover, China Exim Loans are only one of the sources of multilateral and bilateral loans accessed by Nigeria and represented only about 8.5% of Nigeria’s External Debt as at June 30, 2018,” the debt office said in a statement.
The agency noted that the Nigerian government accesses capital from several sources – multilaterals, such as the World Bank and the African Development Bank, as well as, Bilateral loans from various countries such as France (through the Agence Francaise de Development -AFD), Germany (KfW), Japan (Japan International Cooperation Agency – JICA), India (India Development Bank) and China (China Export-Import Bank – EXIM), the statement issued to inform Nigerians about the Government’s borrowing from China. These loans from Multilateral and Bilateral lenders are typically used to finance specific capital projects across the country. The International Capital Market is another source of capital,” it added.
The DMO explained that Nigeria raises capital from Multilateral and Bilateral sources like China because they are Concessional which means that they are cheaper in terms of costs, and more convenient to service because they are usually of long tenors with grace periods. Prudent management of the public debt implies that, the Government should avail itself of the opportunity to access concessional loans which deliver twin benefits of being more cost efficient and supporting infrastructural development.
“Nigeria’s Public Debt remains sustainable and there is also no risk of default because of Nigeria’s sound Debt Management practices,” said DMO.