December 4, 2023

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Is Nigeria Creeping Towards Debt Trap with China?



Nigeria’s external debt profile has been on the upward trajectory and the prevailing general concern is whether this may be sustainable in the nearest future. Going by the information emanating from the Debt Management Office, as at the fourth quarter of 2021, Nigeria’s external debt has risen to $38.39bn. This, by any standard is very steep rise.

The external debt profile as at March 31st 2015 was $9.46bn which was made up of $6.538bn multilateral and $1.426bn bilateral components with $1.5bn Eurobonds. Under seven years, by December 31st 2021, the Debt profile rose to $38.39bn (a growth of over 300%) made up of $18.656bn multilateral and $4.466bn bilateral components. Under Commercial Papers, Eurobond is $14.368bn while Diasporabond has $0.3bn. Promissory Notes is $600.64.


Looking at the bilateral component of $4.466bn, China Exim alone has $3.63bn. With that, Nigeria appears to be inching towards a debt trap especially considering the hard line stance of China whenever any country is unable to meet its debt service obligations. China may actually be applying what, in international finance, is termed debt-trap diplomacy, a situation where a creditor country is extending debt to a borrowing nation with a view to extending the lender’s political leverage.

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The other countries with a share of the bilateral loan to Nigeria include France – $561.60m, Germany – $164.27m, India – $33.48m and Japan – $71.79m. One can therefore infer that China is up to something, bearing in mind what it has done to some other economies.

The question one may ask is, where did Nigeria apply these funds when they were borrowed? Unfortunately, a good proportion of the borrowings might have been applied to areas that will help to assuage political interests. For instance, if the funds applied to extend the rail line to Katsina and Niger Republic were invested in routes like Abuja to PortHarcourt or Lagos to Onitsha rail projects, one can be sure it will be commercially yielding because of the large patronage rail services will enjoy on such routes.

The big issue however, is that the funds needed to grow the economy will be deployed in servicing these debts. Besides, the over bloated bureaucracy remains a major challenge as recurrent expenditure will continue to gulp larger proportion of the budgetary outlay. That invariably leads to consistent deficit financing. There are more commercially viable areas bilateral loans can be applied to such as the second Niger bridge which, when tolled will generate a lot of revenue.  There are other high traffic areas that will generate more revenue for payback of any facilities. It is also imperative to imbibe the political will to maintain lean bureacracy to save funds.

The danger is that as long as the Debt-GDP ratio continues to rise especially with the poor productive capacity of the Nigerian economy, the promised land will remain far-fetched. It requires a committed leader to get out of the impending debt trap and thats why the Nigerian electorate must be careful in electing the right person who can deliver in 2023.


Alex Anameje

Alex Chidi Anameje is Chief Analyst at Continental Economy Magazine and a Partner at Corporate Skills Bridge Ltd. He is an economic researcher of many years standing. A former Deputy Director and Head of Consultancy, Training and Research of the Chartered Institute of Bankers of Nigeria. Alex holds a B.Sc(Honours) of the University of Nigeria in Statistics and Economics, a Postgraduate Diploma of the University of Ibadan in Economics with emphasis on Operations Research and an M.Sc of the University of Lagos in Economics with emphasis on Econometrics. He was for many years the Editor of The Nigerian Banker, the professional journal of The Chartered Institute of Bankers of Nigeria. He is also a Fellow of the Institute of Management Consultants of Nigeria, FIMC; Member, Nigerian Economic Society, MNES; Associate, Institute of Chartered Mediators and Conciliators, AICMC; Member, Nigerian Statistical Association and Senior Member, Chartered Institute of Bankers of Nigeria, HCIB. Alex is a Paul Harris Fellow, PHF, of Rotary International. He is happily married with children and enjoys reading and writing

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