Total loans by the Chinese government and affiliate agencies to Nigeria is about $3.121 billion and constitutes only about 3.94 per cent of Nigeria's total public debt of $79.3 billion as of March 31, the Debt Management Office (DMO) has said.
Also, in terms of external sources of funds, Chinese loans account for about 11.28 per cent of the country's external debt stock of $27.67 billion by the same date.
The DMO said the clarification was necessary to show that China is not a major source of funding for the Nigerian government, contrary to recent reports by certain persons, including members of the National Assembly that Nigeria has mortgaged its sovereignty to China through loans.
Recently, the House of Representatives constituted an investigative committee to review all extant China-Nigeria loan agreements since 2000 to ascertain their viability, regularise and renegotiate them.
The lawmakers said despite being the arm of government responsible for appropriation, the National Assembly was in the dark on how most of the Chinese loans were collected and utilised by the government.
Noting alleged fraudulent, irregular and underhand characteristics of many Chinese loan contracts with African States, the lawmakers expressed concern that the loans have become a new form of economic colonialism by China.
They alleged that China has since emerged Nigeria's major creditor under various bilateral deals with the Nigerian government, with the EXIM Bank of China becoming Nigeria's biggest bilateral creditor since 2002.
However, apart from China not being the major source of funding for the Nigerian government, the DMO said most of the loans come at concessional terms, with interest rates of 2.50 per cent per annum, 20 years tenor and seven years repayment moratorium period.
The Director-General of the DMO, Patience Oniha, in a statement Wednesday, said these terms are compliant with the provisions of Section 41(1a) of the Fiscal Responsibility Act, 2007 backed by the country's Constitution.
Mrs Oniha said the low interest rate in the Chinese loans reduces the interest cost to the government, while the long tenor enables the repayment of the principal sum of the Loans over many years.
"These two benefits make the provisions for Debt Service in the Annual Budget lower than they would otherwise have been if the loans were on commercial terms," Mrs Oniha said.
Where Chinese loans go to
The DMO Chief said all the Chinese loans as at March 31, 2020 are tied to 11 specific projects, namely the Nigerian Railway Modernisation Project (Idu-Kaduna section), Abuja Light Rail Project, and Nigerian Four Airport Terminals Expansion Projects (Abuja, Kano, Lagos and Port Harcourt).
Other projects are the Nigerian Railway Modernisation Project (Lagos-Ibadan section) and Rehabilitation and Upgrading of Abuja- Keffi- Makurdi Road Project.
Arguing that the impact of these loans is evident, Mrs Oniha cited the example of the Idu-Kaduna Rail Line, which has become a major source of transportation for Nigerians travelling between Abuja and Kaduna.
Also, she said the new international airport in Abuja has improved air transportation, while the Lagos-Ibadan rail line when completed, would significantly ease traffic on the busy Lagos -Ibadan Expressway.
Beyond these benefits, Mrs Oniha said the projects have brought additional benefits in terms of job creation through direct and indirect service providers, including Small and Medium Enterprises.
She said deploying Chinese loans to finance infrastructure development in the country aligns with the widely accepted argument that investment in infrastructure was one of the most effective tools to achieve economic growth and development.
Loans procurement conditions
The DMO DG said the principal process and requirements for borrowing by the government are captured in the DMO Establishment (ETC) Act, 2003 (DMO Act) and the Fiscal Responsibility Act (FRA), 2007.
She drew attention to Section 21 (1) of the DMO Act, which says: "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."
Also, Section 41 (1a) of the FRA states: "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 amortisation period subject to the approval of the appropriate legislative body where necessary."
Before taking the loans, the DMO boss said the Federal Ministry of Finance, Budget and National Planning usually works with the DMO and the ministries, departments and agencies under whose portfolio a proposed loan falls.
Thereafter, she said, the approval of the Executive Council of the Federation (FEC) is usually sought, after which the President would present a request to the National Assembly seeking for the approval as required by Section 41 of the FRA 2007.
"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.
"(But), the loans are taken and Nigeria begins to drawdown on the loans only after the National Assembly has given approval. In summary, borrowing is a joint activity between the Executive (FEC) and the Legislative (NASS) arms of the government," Mrs Oniha explained.
Amaechi on 'waiving Nigeria's sovereignty'
On Sunday, August 2, 2020, the Minister of Transportation, Rotimi Amaechi, also explained the controversial clause 'waiving sovereignty' in the loan agreements between Nigeria and China.
The minister said contrary to fears expressed about Nigeria giving away her sovereignty for the Chinese loans, the clause was only a contract term to give payback assurance on the terms and conditions of the loan.
There is no contract without an agreement, and that agreement must contain some terms, one of which is not that you are signing away the sovereignty of the country, the minister said.
"No country will sign away its sovereignty. What you do is, you give a sovereign guarantee waiving the immunity clause.
"The immunity clause is that, if tomorrow the country is not able to pay back the loan and the country can come and collect the items put down as guarantee," he said.