The Senate on Thursday gave nod to the $22.7 billion loan request by President Muhammadu Buhari, bringing Nigeria's external debt stock to nearly US$50 billion, amid lawmakers and public's concerns the approval was without scrutiny.
The government of Mr Buhari desperately needed the approval as African's largest economy returns to the international debt market to shake off impacts of recession and finance the budget this year. Particularly, Nigeria's ambition to close the infrastructural gap, including in power and transportation sectors, depends, largely, on project-tied Chinese loans.
About 70 per cent (that is, $17,065,496,773) of the new $22.7 billion loan bid will be coming from China's EXIM Bank, Nigeria's biggest bilateral lender in nearly two decades.
Apart from China, the other lending agencies are the World Bank, $2,854,000,000; Afrivan Development Bank (ADB), $1,888,950,000; Islamic Development Bank (IDB), $110,000,000; Japan International Cooperation Agency (JlCA), $200,000,000; German Development Bank (KFW) - $200,000,000; China Exim Bank, $17.065.496.773; and the French Development Agency (AFD), $480,000,000.
Already, since 2002, Nigeria had borrowed $6.5 billion from China to fund various infrastructural projects, according to official disclosures to PREMIUM TIMES following Freedom of Information requests to the Debt Management of Office and the finance ministry in 2019. According to the disclosures, transportation and ICT sectors have six projects each financed by loans from the Chinese bank, while energy, agriculture and water sectors, respectively, have three and two projects tied to Chinese loans.
The certain details of the projects to be funded with the fresh loan from China are slow to emerge. However, it is believed that the Mambilla hydropower project costing nearly $5 billion will top the table. By the end of 2019, talks between Nigeria and China for a loan to finance the 3,050 Mambilla project, in Taraba State, northeastern Nigeria, had reached an advanced stage. It is one of Africa's biggest dam projects but it has been stalled for over 40 years
Even without the new new loan, Nigeria will still be servicing the Asian power's loan till around 2038, the maturity date for the last loans obtained in 2018.
Chinese loans have long tenor, usually between 19 and 20 years, the disclosures made to PREMIUM TIMES by the DMO and finance ministry showed. Based on this analysis, if new the deals signed this year, Nigeria would keep servicing Chinese loans till around 2040.
Already, over a quarter of Nigeria's N10.59 trillion ($35 billion) 2020 budget, that is N2.7 trillion, goes to debt servicing, exceeding N2.4 trillion appropriated for capital expenditure.
Chinese loans are disbursed by the EXIM Bank, with interest subsidised by the country's ministry of commerce, which assigns (Chinese) contractors to execute projects tied to the loans. This chain barely allows cash to get into the hands of the recipients; rather, the loans are offered in the form of projects
Between 2000 and 2017, China extended African countries $143 billion loans, and Angola is the top recipient with approximately $43 billion received since 2002, according to the China Africa Research Initiative at the John Hopkins University in the United States.
Ethiopia, Kenya, South Africa, Sudan, DR Congo and Egypt, among others, are other African big borrowers from China.
Since the turn of the century, China has increasingly had expansive presence in Africa as a donor and trade partner. Although the United States remains Africa's biggest donor, China is threateningly rivalling the traditional Western donors in the latter's historically cultivated sphere of influence, that is, Africa.
The popularity of China among Africa leaders is due to its approach to aid. Its loans are mostly non-conditional and without interference. They also have a low-interest rate and sometimes, natural resources are used for repayment, for instance in Angola.
By not attaching human rights, environmental and governance requirements to its aids, critics say China is worsening authoritarianism in Africa. Others also criticise Chinese aids and loans for their opacity and poor standard. Some also say China under-prices Africa's resources and are steep in labour abuses in the continent.
But pro-China analysts say using resources to repay loans helps cover critical infrastructural deficits in the continent. They say China's involvement in Africa offers a "win-win" situation - trading abundant resources for rollback infrastructural deficit.
In the case of Nigeria, natural resources are not used to repay loans.
"No, we are using our own money to repay the loans, unlike other countries," one top government official seeking anonymity told PREMIUM TIMES last year.
Under late President Umaru Yar'Adua, China once unsuccessfully approached Nigeria with $50 billion crude oil-backed loans to finance various infrastructural projects, including oil refineries, according to former presidential spokesperson Segun Adeniyi, in his book on the Yar'Adua administration, Power, Politics and Death.
But this may not be the case for long as repaying loans with natural resources such as crude oil is increasingly being considered by Nigeria, the official said.