Nigeria is not at risk of default with respect to credit facilities from the China EXIM bank considering that the entire $3.1 billion owed the bank as at March 31 2020, represents less than four per cent of the country’s total debt stock of about $79 billion.
Professor Uche Uwaleke in a reaction to an alarm raised by a member of the National Assembly on the waiving of sovereignty in the debt agreement with China said, “China can only take over a country’s assets built with the loans which served as collateral security.
“The relevant clause usually invoked in the event of default relates to waiver of commercial sovereignty which is a standard clause in bilateral loan agreements of this type.
“This, in no way, is tantamount to waiver of diplomatic sovereignty which borders on the independence of the country in question.”
Uwaleke, who is a professor of capital market at the Nassarawa State University, Keffi explained that as a non-aligned creditor country not belonging to the Paris Club of creditors, China needs such a sovereign guarantee in bilateral commercial deals to facilitate enforcement of loan terms.
“In any case, adequate provisions have been made in the MTEF for the servicing of public debts the bulk of which, about 65 per cent, is domestic debt.
“Unlike Eurobonds which constitute circa 40 per cent of the country’s external debt and contracted on commercial terms, China loans are largely concessional.
“Currently, and to my knowledge, Nigeria is enjoying facilities from China EXIM Bank at 2.5 per cent for 20 years with seven years moratorium.
“Like infrastructure bonds such as Sukuk, they are project-tied.
“In addition, the money goes straight to the Chinese firms handling the projects thereby minimizing the likelihood of diversion,” he disclosed.
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