The United States of America has expressed concerns over the encroachment of China into Nigeria with overbearing loans, saying the country now has the potential to influence the Nigerian government through its loans.
This was stated in the Integrated Country Strategies document by the US Department of State and made available to the media.
The document, which was originally approved on April 6, 2022, was reviewed and updated on June 23, 2023.
As stated in the document, the US accused China of offering sub-prime financing for various infrastructure projects in Nigeria.
According to Investopedia, subprime is a credit classification for borrowers with a tarnished or limited credit history and for loans made to such borrowers. Because subprime borrowers are considered riskier than the average borrower, subprime loans are subject to higher-than-average interest rates.
The document read in part, “Meanwhile, China offers sub-prime financing for a range of infrastructure projects, with the potential to add unnecessarily to Nigeria’s debt burden and increase Chinese influence over the Nigerian government.”
China, in its bilateral relations with most African countries, has adopted debt-trap diplomacy, wherein it extends debt to borrowing nations partially or solely to increase its political leverage on the continent.
And where the borrowing nation defaults on the loan repayment, China, as the lender, could take over the country’s assets financed with the loan, just like it reportedly happened in Uganda.
In Nigeria, a report by The Punch showed that the country owed the Exim Bank of China $4.34 billion as of March 2023.
The same medium reported in January 2022 that a Chinese company, Chinese Civil Engineering Construction Corporation, handled the majority of railway projects in Nigeria worth over $25.51 billion (N10.5 trillion), according to the United States-based Fitch Solutions’ latest report on Nigeria’s railway system.
The report, titled ‘Nigeria Rail: Near-term Focus on the Northern Region with Long-Term Upside for Southern Projects, said Chinese financing had enabled CCECC to handle most rail projects in the country.
The report, however, listed other companies that were major players in the Nigerian railway sector.
It read in part, “China Civil Engineering Construction Corporation has dominated the railway construction sector in Nigeria, supported by Chinese financing.”
The breakdown of the top rail projects handled by CCECC showed that the approved Lagos-Calabar coastal railway project covering 1402km was awarded to the Chinese company for $11.10 billion.
Also, the Abuja-Itakpe-Warri rail line project with a contract value of $3.90 billion, sponsored by China Railway Construction Corporation and EXIM Bank of China, was awarded to CCECC, Julius Berger, and Sinohydro Corporation, another Chinese company, alongside General Electric. The project is still in the planning stage.
The Federal Government had sought loan facilities from Chinese lenders to implement several infrastructural projects, including standard-gauge rail lines.
In a document titled ‘Status of Chinese Loans as of September 30, 2021’, the DMO disclosed that 15 projects were funded with Chinese loans. Four of the 15 projects were rail-related.
In its Integrated Country Strategies document, the US also faulted the political and economic systems in the country.
The document read, “Nigeria’s fundamental problem is patronage-based political and economic decision-making, with little to no coordination between relevant ministries and a disempowered civil service that does not sufficiently advise the Federal Government or sustain policy objectives over multiple administrations.
“Political and economic elites lobby for policy decisions that favor their short-term personal interests rather than the longer-term stability and unity of the state.”
