The Federal Government of Nigeria on Tuesday explained that it decided to seek a $17bn loan from the China-Exim Bank as other lending institutions like the World Bank and the African Development Bank were not showing much interest when Nigeria approached them during recession.
Speaking on Tuesday while defending government decision to borrow $29.96bn loan to fund critical infrastructure across the country, the Minister of Finance, Zainab Ahmed told the Senate Committee on Local and Foreign loans that the country had no issue with its current debt profile but noted that its dwindling revenue could not fund the various projects that were expected to have meaningful impact on the lives of Nigerians.
She added that the 8th National Assembly had approved about $6bn for the Federal Government out of the $29.96bn loan, leaving a balance of $22.8bn.
Ahmed further noted that the Federal Government and some state governments were jointly requesting the loans from various lending institutions, hence some states would be responsible for the payment of some of the loans.
In her words, “The funds ($22.8bn) will be channelled to the funding of infrastructure, which will enhance the productivity of our economy.
“Other projects are in healthcare and education. It also includes projects for the rehabilitation of the North- East geopolitical zone, which has been ravaged by insurgency.
“Others are the Mambila Hydro Power project ($4.9bn), Lagos-Kano modernisation rail project ($4.1bn), the Development Finance project loan being provided by a consortium of World Bank and African Development Bank agencies ($1.28bn).
“Above all, the loan will help us to improve our electricity supply, reduce poverty, create jobs, ensure access to finance, agricultural productivity, guarantee food security, achieve high school enrolment, provide clean potable water, rehabilitate major roads and develop the mining industry.”
The Minister added that 70 per cent of the foreign loan from China will make funds available to local development institutions for SMEs.
“It is meant to make funds available to our own development institutions so that they can give out loans because access to finance has been difficult for the SMEs.”
She added that the nation’s debt level was low compared to other countries like the USA, the United Kingdom and Canada and is sustainable.
He said, “The ratio for December 2018 was 19.09 per cent but it reduced to 18.9 per cent by the middle of 2019.
“The debt service to revenue ratio is however high and it provides us strong justification for us to drive our revenue.
“For 2017, the ratio was 57 per cent and 51 per cent in 2018.”