China's Debt Trap: China Reveals Plan For Nigeria's Debt Burden

Six days after AllNews reported why China will not cancel Nigeria's debt, the Asian country has revealed its debt plan for Nigeria amidst coronavirus outbreak, and part of the plan includes implementing the debt service suspension initiative to ease Nigeria’s debt burden to China.

Presently, China accounts for 10% of Nigeria's $27.6 billion external debt stock as Nigeria owes China about $3.1 billion. Also, AllNews recalls that the Minister of Finance, Zainab Ahmed, had stated in February that due to the lack of interest from the World Bank and the African Development Bank (AfDB) to offer Nigeria loan during the recession, the Federal Government approached China for a $17 billion loans.

And coupled with other external debt, for every N1 made by the country, 96kobo is used to repay loan, according to the Director of Centre for Infrastructure Policy Regulation and Advancement (CIPRA), Lagos Business School, Dr Bongo Adi. This places Nigeria's revenue under immerse pressure and debt burden.

China's Plan For Nigeria And Other African Countries

In a show of support, China's Foreign Minister, Wang Yi, said the Asian country will ease Nigeria and other African country's debt burden by working with G20 members to implement the debt service suspension initiative. This comes after AllNews had reported that the International Monetary Fund (IMF) and World Bank have been facilitating a debt standstill for countries with the debt burden.

While speaking of China's plan, Yi said apart from the debt suspension, China will also offer bilateral support for Nigeria, “China is also considering further bilateral support for African countries under the greatest strain to help African brothers and sisters through this difficult time.

“Our people, having fought shoulder to shoulder for national liberation, are partners for common development. A few years back, we were together fighting Ebola.” He made this known on the sidelines of the annual Chinese national legislative session.

China Is Sending More Doctors, Build Africa CDC Headquarters

Yi revealed that five sub-regions and surrounding countries had received medical expert teams from China, “Resident Chinese medical teams based in 45 African countries have acted swiftly to assist in the local response. They have held nearly 400 training sessions for tens of thousands of African medical workers."

He added that "First, China will continue to stand by Africa as it fights the virus. China will send anti-epidemic assistance to African and other developing countries as a matter of priority. China is considering sending more medical expert teams to the continent.

“China will continue to deliver on the health initiative announced at the FOCAC Beijing Summit. China will accelerate construction of the Africa CDC headquarters, and help boost public health capacity in African nations.”

Why China Won't Cancel Nigeria's Debt

President Muhammadu Buhari prefers the cancellation of debt, but bilateral creditors are not willing to do that. China for instance, will rather suspend the debt payment rather than forgive the debt. According to the Head, China Africa Research Initiative at Johns Hopkins University, Deborah Brautigam, China believes that every loan is for structural transformation and economic development which will better position these countries and enable them to repay their debts.

"The Chinese have always done their lending on the idea that individual projects contribute to structural transformation and economic development. Those projects might be good projects and viable projects to get countries to a new stage where they might be in a position to repay the loans," Brautigam explained.

Nigeria Moving Closer to China's Debt Trap

With most of China's loans tied to infrastructure, there are fears that Nigeria is moving closer to China's debt trap due to the level of debt the country owes to China. Nigeria is in a tight position as regards debt repayment and the coronavirus pandemic has only made the situation worse.

About 17 loans have been obtained by Nigeria from China for different capital projects. The loans from China will continue to be serviced by Nigeria until 2038. If Nigeria is unable to pay up or renegotiate for extension in due date, Nigeria might end up like Rwanda, Sri Lanka and Zambia. These countries are struggling to keep some of their most valuable infrastructure.

This is a tactics Adi called Chinese Chopstick Imperialism, "Chinese strategically tie loans to infrastructure and that is with the intention of taking possession of the infrastructure asset if there is the default, as such asset became their collateral,” Adi said.