Following a fresh request of $22bn from the China Exim Bank for the funding of the Kaduna-Kano standard gauge rail which was rejected. The House of Representatives Committee on Finance has in the alternative approved China Development Bank as the alternative financier of a revised loan of $973m.

The Committee said it has harmonized terms and was aware that the contractor for the project CCECC Nigeria Limited in collaboration with the Federal Ministry of Transportation engaged the China Development Bank as the new financier.

It will be recalled that the sum of $22.798bn under the 2016-2018 Federal Government External Borrowing (Rolling) Plan, was approved by the Senate and the House of Representatives on 5th March 2020 and 2nd June 2020, respectively.

The Federal Ministry of Finance requested approval for the modification to the financing proposal for the Nigerian Railway modernization project (Kaduna-Kano segment), occasioned by the COVID-19 pandemic which witnessed China Exim Bank withdrawing support.

Since 2016, the administration of President Muhammadu Buhari, GCFR set out to build and revive Nigeria’s ailing infrastructure through roads, highways, railways and the upgrade of international airports.

This led to significant concessionary borrowings from countries like China, which has seen construction companies like the CCEC (Chinese Civil Engineering Company) execute various projects. 

The rejection of the $22.798bn loan financing request by China Exim Bank and the alternative approach of $973m funding from China Development Bank, has raised concerns about Nigeria’s borrowing and its ability to fund the 2023 capital expenditure component of its budget.

Nigeria’s Current Debt Profile

According to the Debt Management Office, DMO Nigeria’s total public debt for the year 2022 reached N46.52trn.

In terms of composition, the Total Domestic Debt Stock was N27.55trn ($61.42 bn) while Total External Debt Stock was N18.70trn ($41.69bn). 

Amongst the reasons for the increase in the Total Public Debt Stock were new borrowings by the FGN and sub-national governments, primarily to fund budget deficits and execute projects. 

Analyst Perspective 

According to Kelvin Emmanuel a public affairs analyst, the recent rejection of the rolling plan of $22.8bn by the Chinese EXIM Bank under the Bilateral Debt program of the Nigerian Government, to fund a N12trn deficit in the 2023 appropriation act, is an indication of a fiscal cliff. 

The Eurobonds market is currently out of reach because, at Caa1 sovereign credit rating, the Debt Management Office (DMO) would not find off-takers for its Offer. The rejection of Nigeria’s application is both a Qualitative and Quantitative assessment of Nigeria’s fiscal position. 

The current sinking fund of 29% that covers debt servicing and refinancing in violation of the interest on GDP as covered in the fiscal responsibility act of 2007 is disturbing. It does not help that securitization of the Ways & Means at a 9% annual coupon for a 40-Year Government bond will further raise the sinking fund from 29% to 43.8%, which will wipe out nearly half of the savings derived from removing under-recovery on PMS subsidy. 

He believes the Nigerian Economy is currently in dire straits.