Chinese Chopstick: Nigeria's Debt To China Might Be A Trap It Can't Escape From

 

After reports circulated that China will not be forgiving or canceling Nigeria's debt - which is between $3 billion to $20 billion - as preferred by the Nigerian government, the backlog of debts Nigeria owed to China might just be a trap Nigeria might be unable to untangle itself from.

AllNews had reported recently that Nigeria owes China $3 billion, aside from the $17 billion the Finance Minister, Zainab Ahmed said FG was forced to obtain from China after the disinterest shown by World Bank and International Monetary Fund to Nigeria's plight during the recession.

This loan means China account for 10% of the $27 billion bilateral debt of Nigeria. This put China as the largest bilateral creditor of Nigeria. And considering the current situation of Nigeria, the country is in a tight corner to repay its debt to china, according to the Director of Centre for Infrastructure Policy Regulation and Advancement (CIPRA), Lagos Business School, Dr Bongo Adi.

Adi said Nigeria's debt situation shows that for every N1 made by the country, 96kobo is used to repay loan, as Nigeria's debt independent revenue is at 96% now. While the situation is critical, according to Adi, is because Nigeria lacks accountability, transparency and responsibility to refund the loans.

He said Nigeria's ability to refund the debt has been strangulation by the enormous debt the country owes, “We have to look at the total debt and the capacity to repay not just to China but to our creditors. Our Debt independent revenue is at 96% now. That means for every N1 we earn, 96 kobo is used to refund loans. That has passed a critical threshold.

“What it means is that we lack the ability and we don’t have the headroom anymore to repay because our independent revenue has been strangulated by our enormous debt hanging over the Federal Government as it stands now,” Adi said during a Channels TV interview.

Why Nigerians need to be scared

There is a term called, Chinese Chopstick Imperialism, which represents China's decision to tie the loan to infrastructure. The Asian country has been accused of using financial support like loans to take over the infrastructure of countries, especially the developing countries.

Sri Lankan lost its Magampura Mahinda Rajapaksa Port which was funded with a loan from Exim Bank of China after it defaulted. It was leased to the Chinese state-owned China Merchants Port Holdings Company Limited on a 99-year lease in 2017.

Also, Zambia and Rwanda are on the verge of losing state electricity company ZESCO and Port of Mombasa respectively, due to their inability to repay their debt. The countries are reportedly in talks on the debt situation.

Now, 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. And Nigeria, according to the Minister of Finance, has revenue problems, and the country uses 96 kobo of every N1 made to repay debt.

The question is, how long can Nigeria withstand the pressure of its enormous debt and not lose any project to China like other countries are at risk to. Speaking on the problem with Chinese debt, Adi said, “Out of 64 countries that host the Chinese Belt and Road initiative projects, 20 have gone under distress and 8 are about to lose their sovereign debt sustainability if they should take any further loan.

"If that were supposed to be a good guide, it means Nigeria needs to be very careful when we are borrowing from the Chinese. We have seen this Chinese cycle and need to be careful. What normally happens is that the Chinese will begin to take over infrastructure assets, which is what some call Chinese Chopstick Imperialism and the experience is not just pleasant.

"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. According to the report, the servicing of Chinese debt until 2038 is for loans obtained in 2018. And with the economic fallout of COVID-19, the Minister has stated that Nigeria needs to borrow more.