Why FG is seeking $17bn loan from China -Minister
Says Nigeria has no issue with current debt profile but with dwindling revenue
Of the $29.96 billion loan request pending approval of the National Assembly, the Federal Government said it will borrow a chunk of $17 billion from China.
The Minister of Finance, Zainab Ahmed, on Tuesday, explained that the government is looking up to the China Exim Bank for loan to fund infrastructure development.
According to her, government decided to approach the China-Exim Bank for a $17 billion loan request because other lending institutions like the World Bank and the African Development Bank were not forthcoming in lending to Nigeria.
Cancer: Centre advocates increased awareness, screening for rural women
The minister, who was at the Senate Public hearing on the $29.96bn loan proposal, said the decision of the President Muhammadu Buhari administration to borrow $29.96bn loan was to fund critical infrastructure across the country.
She explained that the request is not a fresh one, adding that the 8th National Assembly had approved about $6bn out of the $29.96bn 2016- 2018 Federal Government borrow plan, leaving a balance of $22.8bn.
Ahmed told the Senate Committee on Local and Foreign loans that the Federal Government and some state governments are jointly requesting the loans from various lending institutions.
She said the bulk of the loan, which is about $ 17bn, would come from the China-Exim Bank while others are from lending institutions like the Islamic Development Bank, among others.
The Minister maintained that the country had no issue with its current debt profile but with its dwindling revenue which could not fund the various projects that are expected to have meaningful impact in the lives of Nigerians.
She said: “The funds would be channeled to the funding of infrastructure which will enhance the productivity of our economy. Other projects are in the heath care, education. It also included projects for the rehabilitation of the North East geopolitical zone.
“Others are the Mambila Hydro Power project ($4.9bn), Lagos-Kano modernisation project $4.1bn), Development Finance project loan being provided by a consortium of World Bank and African Development Bank agencies ($1.28bn).
“The facilities will support the setting up of the Development Bank of Nigeria through some development finance institutions in Nigeria to provide funds for small and medium size enterprises.
“This will make access to finance to SMEs easier, help them to grow and help more Nigerians to come out of poverty line.
“Above all, the loan would help us to improve our electricity supply, reduce poverty, create jobs, ensure access to finance, agricultural productivity, guarantee food security, achieve high school enrolment, provision of clean potable water, rehabilitation of major roads and development of the mining industry.
On why the country is seeking 70 per cent of the foreign loan from China, the minister said, “it is meant to make funds available to our own development institutions so that they can give out loans because access to finance has been difficult for the SMEs.”
On the Debt profile of the country, the minister said: “The 2016 – 2018 external borrowing plan is both for the Federal Government and the states. So, some states would be responsible for the payment of some of the loans.
Considering the sustainability of the nation’s debt portfolio, she said Nigeria’s current portfolio ceiling as set by the fiscal Responsibility Act is 25 per cent of total debt to GDP. The ratio for December 2018 is 19.09 per cent but it reduced to 18.9 per cent by the middle of 2019.
“The debt service to revenue ratio is however high and it provides us strong justification for us to drive our revenue. For 2017, the ratio was 57 per cent and 51 per cent in 2018.
“Our debt level is low compared to other countries. For instance, the USA, United Kingdom and Canada has debt rate to GDP ratio of 105 per cent while their debt to revenue service is 12.5 per cent”.
