Chinese President Xi Jinping has indicated that his country and other G20 members are mulling a Debt Service Suspension Initiative for Nigeria and other African countries struggling to meet their debt obligations due to the COVID 19 pandemic.
Jinping made this known during his address at the opening of the 73rd World Health Assembly.
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“China will work with other G20 members to implement the Debt Service Suspension Initiative for the poorest countries. China is also ready to work with the international community to bolster support for the hardest-hit countries under the greatest strain of debt service so that they could tide over the current difficulties”, he said.
Similarly, Deborah Brautigam, Head, China Africa Research Initiative, Johns Hopkins University in an article for Bloomberg said that there is a likelihood for China to agree to delay but not forgive its $152 billion of loans, an approach at odds with prior forbearance plans from groups including the Paris Club.
She posited that the Chinese have always done their lending on the idea that individual projects contribute to structural transformation and economic development.
“The Chinese have always done their lending on the idea that individual projects contribute to structural transformation and economic development. Those projects might be good projects and viable projects to get countries to a new stage where they might be in a position to repay the loans. The good news is that China is typically willing to negotiate payment extensions. Usually, it’s not that difficult to lengthen the payment period or lengthen the maturity of loans. China has backed the G-20 plan, although it hasn’t participated in previous global debt relief initiatives. According to data from the Institute of International Finance, Inc IIF, China’s outstanding debt claims reached $5.5 trillion last year,” she said.
China is at the fore of Africa’s debt drive, making the Asian nation Africa’s largest bilateral creditor, as it has given the continent loan worth $152 billion in 18 years (between 2000 and 2018.)
Recall that Nigeria owes China more than $3.1 billion which is more than 10% of the $27.6 billion external debt stock. Minister of Finance, Zainab Ahmed, disclosed in February that the Federal Government decided to go for a $17 billion loan from China as the World Bank and the African Development Bank’s (AfDB) failed to show much interest in Nigeria during the recession.
The minister explained that the global lender, AfDB, and other lending institutions failed to show much interest in the nation during the recession period, which lasted for a year, as this made it requested the loan from the China-Exim Bank.
She disclosed to the Senate Committee on Local and Foreign Loans that 70% of the loan, which is about $17 billion, would come from the China-Exim Bank as Nigeria is in need of $22.8 billion to balance the $29.96 billion loan request. Meanwhile, the remaining loan would be sourced from other lending institutions such as the Islamic Development Bank.
Recall also that in January this year, the Central Bank of Nigeria (CBN) revealed that Nigeria spent $1.31 billion to service external debt obligations between January and November last year.
According to CBN, the external debt service payment stood at $1.31 billion at the end of November last year, compared to $1.47 billion spent in the corresponding period of 2018 amid concern that Nigeria’s external debt profile continues to snowball and its attendant cost is worrisome.
