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Chinese Loans Represents Under Four Per Cent Of Nigeria’s Total Public External Debt, Says DMO

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In response to the raging controversy over the “sovereignty clause” in the legal agreements signed by the Buhari administration as part of obtaining multi-billion dollar loans from the Chinese government, Nigeria’s Debt Management Office (DMO) says that the country’s total debt exposure to the People’s Republic of China is $3.122 billion, around 3.94 per cent of Nigeria’s total public debt of $79.303 billion as at March 31, 2020.

The DMO said the clarification had become necessary after several media reports suggested that the loans taken from China contained clauses that would cede Nigeria’s sovereignty to one of Asia’s economic powerhouses.

The debt management agency said that in terms of external sources of funds, loans from China accounted for 11.28 per cent of the External Debt Stock of $27.67 billion at the same date.

The agency said that the loans from China are concessional instruments with interest rates of 2.50 per cent per annum, a tenor of 20 years and a 7 year Moratorium.

The DMO said that the low interest rate reduces the government’s borrowing costs while the long tenor enables the easy repayment of the principal sums.

According to DMO, the terms of the loans are compliant with the provisions of Section 41 (1a) of the Fiscal Responsibility Act, 2007.

“The principal process and requirements for borrowing by the Government are expressly stated in the Debt Management Office Establishment (ETC) Act, 2003 (DMO Act) and the Fiscal Responsibility Act, 2007. Section 21 (1) of the DMO Act, “No External loan shall be approved or obtained by the Minister unless its terms and conditions shall have been laid before the National Assembly and approved by its resolution” and Section 41 (1a) of the FRA, “Government at all tiers shall only borrow for capital expenditure and human development, provided that, such borrowing shall be on concessional terms with low interest rate and with a reasonable long amortization period subject to the approval of the appropriate legislative body where necessary”, are instructive in this regard,” the statement read.

While the listing the projects for which the loans have been taken, the debt management agency warned Nigerians to be guided by facts. It said some of the projects include: Nigerian Railway Modernization Project (Idu-Kaduna section), Abuja Light Rail Project, and Nigerian Four Airport Terminals Expansion Projects (Abuja, Kano, Lagos and Port Harcourt), Nigerian Railway Modernization Project (Lagos-Ibadan section) and Rehabilitation and Upgrading of Abuja – Keffi- Makurdi Road Project among others.

“To summarise, the Federal Ministry of Finance, Budget and National Planning works with the MDAs under whose portfolio a proposed loan falls and also with the DMO. Thereafter, the approval of the Federal Executive Council (FEC) is sought. It is only after the approval by FEC that His Excellency requests for the approval of the National Assembly (NASS) as required by Section 41 of the Fiscal responsibility Act, 2007. More importantly, it is only after the approval of NASS that the Loans are taken and Nigeria begins to drawdown on the Loans.In summary, Borrowing is a joint activity between the Executive (FEC) and the Legislative (NASS) Arms of Government. The Loan Agreements are reviewed by legal officers of the Federal Ministry of Justice and the Legal Opinion of the Honourable Attorney General of the Federation and Minister of Justice.”

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