A recent report has caused concern by alleging that Nigeria has defaulted on repaying Chinese loans and now faces a risk of paying a penalty of N41.31 billion. The report which cited the Debt Management Office (DMO) as reference revealed that Nigeria has failed to service its debt of N110.31 billion to China, an amount that is said to have accrued over the course of the last two years. China’s debt stock comprised principal and interest. From January 2021 through December 2022, interest and principal fees were reported to total N41.3 billion ($92.1 million) and N69 billion ($153.85 million), respectively.
The debts, as stated in the report, were incurred after the completion of the Nigeria Railway Modernization Project (Idu-Kaduna Section), the Nigeria Railway Modernization Project (Lagos-Ibadan Section), and the Nigeria Abuja Light Rail Project. A response from the DMO was published on its website, where it deemed the report “false” and urges the general public to disregard it. It also affirmed that “Nigeria has not defaulted on any of its debt services obligation”. According to DMO Director-General Patience Oniha, making interest and principal payments on time is an ongoing process that constitutes “debt service.”
It was highly unlikely for Nigeria to default on loan servicing.
She elaborated in a prior interview on how Nigeria has been running a budget deficit for decades and financing it almost entirely through borrowing, leading to a rising debt stock. She argued that it was highly unlikely for Nigeria to default on loan servicing because the government had taken the appropriate steps to ensure that different debt instruments mature at different times. There is also a strategy in place and the Minister of Finance, Budget, and National Planning and the Governor of the Central Bank are aware of when debt comes due.
Furthermore, Oniha encourages Nigerians not to be alarmed or startled by the government’s decision to borrow funds to finance development projects. She claims that the government’s need to borrow and subsequent repayment strategies were laid out in detail in the Economic Recovery and Growth Plan (ERGP). This is largely responsible for our timely recovery from the recession. China, being Nigeria’s largest creditor, the Federal Government borrowing from China has so far increased from $1.58 billion in June 2015 to $5.07 billion in December 2022, with total public debt reaching N46.25 trillion by the end of the same year.
Nigeria’s debt burden consumes more than 80% of its annual revenue.
There is a growing panic that Nigeria would default on its massive and growing debt to China. According to Zainab Ahmed, Nigeria’s Minister of Finance, Budget, and National Planning, the country is “suffocating” under its current debt burden, which consumes more than 80% of annual revenues. She said the administration is aiming to bring it down to 60% this year. Oniha voiced alarm over Nigeria’s mounting debt even though she had no doubts about the country’s ability to repay, despite the fact that the debt to GDP ratio was 23% rather than the 40% projected by the government.
In addition, she expressed discontentment at the current level of revenue, saying that it must increase by a factor of percent. Remarking on the debt issue, Taiwo Oyedele, PwC’s Fiscal Policy Partner and Africa Tax Leader, indicated that inefficient government expenditure and unclear priorities are major factors contributing to the rising debt. Oyedele stated that Nigeria frequently spends on white elephant projects instead of focusing on fundamental infrastructure and human capital development. He pointed out that even when the projects are necessary, they are generally over budget and take too long to complete, resulting in higher expenses and less public value.
Government should have given many projects to the private sector.
While Eze Onyekpere, the Lead Director of the Centre for Social Justice (CSJ), also shared his thoughts, he emphasized the problem of revenue leakages, where money that should be going to the treasury is being diverted somewhere else. He said the government should have given many projects to the private sector citing the railway construction as an example. As he put it “It’s the same as if the government built a road and people bought buses, he explained; the government could establish the lines, but it wouldn’t have to operate the waggon”.
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Concerns as Nigeria alleged for loan default. – The debts were incurred after completion of several projects. – Express your point of view.
It is very sad that Nigeria meet herself in this type mess and all this is so because of lack of proper management of our resources.The country is bless but selfish interest of both the politicians and the bearucracy lead us all in this type of mess.
To be candid, Nigeria public debt is has risen to a level that we should be wary about it. Any small development requirement in the country is implemented using loans. This is why majority of our annual revenue is used to service debt.
It is ludicrous that Nigeria has maintained sustaining a budget in the red for a long time and funding it nearly completely through taking on debt, which has led to an increasing debt stock.
Our debt is too much, at this rate I’m feeling China is will just come one day and colonize us again because we are already owing them too much and that is very bad.
It is unfortunate that even when the projects are required, they are almost always completed over budget and in excess of the allotted amount of time, resulting in higher costs and less value to the general population.
The allegations of loan default in Nigeria are cause for concern and the need for greater transparency in the country’s borrowing and lending practices should be considered.
The country debt is too much because of our poor economy making us to be borrowing money now our debt is high we need to find way for us to live without borrowing money and how our economy will balance without borrowing
Concerns as Nigeria alleged for loan default.
This is too bad to hear, is like after they collect the loan. They share the money among themselves What a disgrace and disappointment from this government. So after all this poor and failed governance they still collect allowance of different kinds. What a mess
The loans are too much. Where are they going to get money to service all these loans. Nigeria has started defaulting on the
repaying Chinese loans which has now attracted a risk of paying a penalty of N41.31 billion. This administration is the worst of all administrations.
The Nigerian debt profile is growing out of control. There is that possibility that the debt will overwhelm the incoming administration will be over burden the loan. Already, Nigeria has started defaulting on repaying Chinese loans which posing a great risk of paying a penalty of N41.31 billion. It is well
Concerning reports of Nigerian loan default have prompted discussions on the country’s need for more open borrowing and lending practises.
How we service our debt structure is actually important. There is need to get a payment system that will structure the way the loan we are collecting will be paid back.