According to the USA, Chinese loans have the capacity to influence the Nigerian government. This is noted in the US Department of State’s Integrated Country Strategies paper.
The document was accepted on April 6, 2022, however it was revised and amended on June 23, 2023. According to the paper, China provided subprime funding for a variety of infrastructure projects around the country. A subprime loan, according to the Corporate Finance Institute, is one that is issued to persons who do not qualify for conventional loans at an interest rate higher than prime.
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.”
Nigeria owed the Exim Bank of China $4.34bn as of March 2023. In January 2022 that a Chinese company, Chinese Civil Engineering Construction Corporation, handled the majority of railway projects in Nigeria worth over $25.51bn (N10.5tn), according to the United States-based Fitch Solutions’ latest report on Nigeria’s railway system.
The report, titled ‘Nigeria Rail: Near-term focus on 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 authorized Lagos-Calabar coastal railway project totaling 1402km was granted to the Chinese business for $11.10 billion, according to a breakdown of the major rail projects managed by CCECC.
In addition, the Abuja-Itakpe-Warri rail line project, worth $3.90 billion and supported by China Railway Construction Corporation and EXIM Bank of China, was given to CCECC, Julius Berger, and Sinohydro Corporation, together with General Electric. The project is currently in its early stages.
The Federal Government has requested financial arrangements from Chinese lenders in order to carry out a number of infrastructure projects, including standard gauge rail lines.
In a document titled, ‘Status of Chinese loans as at September 30, 2021’, the DMO disclosed that 15 projects were funded with Chinese loans. Four of the 15 projects were rail-related. The US, in its Integrated Country Strategies document, also faulted the political and economic system 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 favour their short-term personal interests rather than the longer-term stability and unity of the state.”
