Osinbajo Explains Nigeria’s Rising Indebtedness to China…

Says China offers 1.5% interest on concessional loans

Vice President Yemi Osinbajo has justified Nigeria’s preference for China’s concessional loans, disclosing that the loans only attract interests of between 1.5 per cent and two per cent. Osinbajo stated this at a meeting with business magnates and strategic investors at the Council for Foreign Relation (CFR), New York. The meeting held during his recent visit to US Vice President Mike Pence.

The CFR, a US non-profit think-tank specialising in foreign policy and international affairs, organised the meeting under the theme, “Nigeria’s Economic Prospects: A Conversation with Vice President Yemi Osinbajo.”

Chinese credit accounts for 80 per cent of all bilateral loans to Nigeria, according to recent data from the Debt Management Office (DMO). China provides loans for Nigeria to build railways, power plants and airports, helping to bridge a huge infrastructure gap in the country. Lending from China makes up only three per cent of Nigeria’s total debt stock of $81 billion, the DMO had disclosed.

However, with the interest rate not exceeding two percent in most cases, Osinbajo insisted that China’s concessional loans were more competitive, progressive and development-driven, compared with about eight per cent that sovereign lenders from other regions offered.

The conversation, which was moderated by a Consumer News and Business Channel (CNBC) contributor, Michelle Caruso-Cabrera, had prominent US investors in attendance. Most of them were seeking more clarification on Nigeria’s business environment and ease of doing business.

In a transcript of the conversation at the council, the Nigerian vice president acknowledged that Nigeria subscribed to China’s Belt and Road Initiative, a global development strategy the Chinese government adopted, which involves infrastructure development and investments in 152 countries in Africa, the Americas, Asia, Europe and the Middle East.

With respect to China’s Belt and Road Initiative, Osinbajo said Nigeria, “Subscribes to it. We are part of that initiative. With respect to infrastructure, we want competitive capital. Our preference is to have private capital doing infrastructure, especially where they can see an income stream.”

The vice president emphasised Nigeria’s search for cheap concessional loans, which according to him, China offered to a large extent. Unlike other regions that offered between seven and eight per cent, Osinbajo said China offered Nigeria relatively “cheap loans for infrastructure.”

However, he acknowledged that sometimes there “are difficulties with negotiations because when you are offering a cheap loan, you want a few extra conditions here and there. What we have found is that it works for us in the areas where the Chinese have given us concessional loans.”

In railways, for example, the vice president cited the case of the Lagos-Kano railway, which he claimed China’s concessional loan had made possible.