Project_Finance_nIGERIA fORECASTS

1. China Belt & Road Initiative Vs. Other International Development Initiatives
(Risk and Prospect Analysis)
DEBT MANAGEMENT OFFICE
NIGERIA
A Paper presented by
Patience Oniha
Director-General
At a
2-day National Conference on Transportation Infrastructure
Development Financing in Nigeria

2. Outline
q China Belt and Road Initiative (BRI)
q Sino-Africa Relations Under the BRI
q Chinese Loans to the Nigerian Government
q Risks and Benefits of the BRI
q Risks and Benefits of Other International Development Finance
q Imperatives for Nigeria
2

3. China Belt and Road Initiative (BRI)
CONCEPT
§ Funding from financing
vehicles like the Silk Road
Fund and State-directed
development and
commercial banks for key
connectivity sectors &
multiple, large
infrastructure projects
important to China.
§ Based on transport
corridors from China to
Europe, Asia & Africa.
OBJECTIVES
§ To promote international
cooperation through
policy, infrastructure,
trade, financial, and
people-to-people
connectivity.
BRI
GROWTH STRATEGY
§ Investment projects estimated
to add more than USD 1 trillion
of outward funding for foreign
infrastructure over a 10-year
period from 2017 .
3

4. Sino-Africa Relations Under the BRI
CHINA
§ Access to natural resources e.g. oil
and gas.
§ Promote national interests on
issues of trade, security,
diplomacy, and soft power.
§ Diversification of economy from
labour-intensive industries to
increased market for Chinese
exports.
§ Political recognition & legitimacy.
At the end of 2020, over 90 BRI-linked projects were estimated to be in the pipeline in Africa. Key interests of both
parties include:
AFRICA
§ Economic development via
infrastructure, trade and
investment.
§ Financing to meet infrastructure
investment deficit.
§ Investment in high-risk, large
infrastructure projects.
§ Alternative source of accessing
capital.
4

5. Chinese Loans to the Nigerian Government
5
CHINESE LOAN FACTS
Total Borrowing
from China
$3.403 billion out of
Total Public Debt of
$87.239bn (3.90%)
§ Nigerian Railway Modernization Project (Idu-Kaduna section)
§ Nigerian National Public Security Communication System Project
§ Abuja Light Rail Project
§ Nigerian Four Airport Terminals Expansion Project (Abuja, Kano,
Lagos and Port Harcourt)
Risks’
q Takeover of Projects financed?
q Sovereign Immunity?
q Project cannot be taken over because of:
• Provision of debt service in the annual Budget.
• Loan Agreements.
Facts about Chinese Loans to Nigeria as at 31st March 2021
% of External Debt
Stock
9.66% of External Debt
Stock ($32.86 bn)
Loan Terms
Concessional, Project-Tied
2.5% p.a rate
20 years tenor
7-year Moratorium
§ Nigerian Railway Modernization Project (Lagos-Ibadan
section)
§ Rehabilitation and Upgrading of Abuja – Keffi- Makurdi
Road Project.
§ Nigerian ICT Infrastructure Backbone Project.
§ Nigerian Zungeru Hydroelectric Power Project
Loan Purpose/Use
15 Projects

6. Risks and Benefits of the BRI
Risks
• World’s largest official bilateral creditor.
• Launched its Multilateral Cooperation Center for
Development Finance (MCDF) towards a more multilateral
rather than bilateral approach.
• Increasingly significant source for development finance for
infrastructure projects.
• Strong Africa focus.
• Concessional.
• Supportive of infrastructure financing.
• Opportunities are good once projects are identified and
approved.
• Backed by political agenda.
• Competitive lending leading to possibility of decline in
debt sustainability by some corridor economies.
• Risk of soft control of strategic transportation hubs &
access to resources (not proven).
• Focused on mutual benefits and profit. (Export Credit
Financing).
• There is a push back on lending practices of China.
(Unproven and may not generally be the case).
6
Benefits

7. Risks and Benefits of Other International Development Finance
Benefits
• Limited funding envelopes that may not meet up
with infrastructure needs of debtors.
• Timeline and process for the approval of Loans fairly
lengthy
• Limited availability for infrastructure financing.
• Focused on ‘social development’ e.g. reforms, capacity
building.
• Policy and governance conditionalities.
• Unified policy framework for debt sustainability.
• Differentiated financing model – International
Development Association (IDA)/ The International Bank
for Reconstruction and Development (IBRD), Commercial
and blended.
• Providing technical capacity and guarantees that could
facilitate inflows of private capital for infrastructure.
• In some cases such as IDA, are more concessional than
Chinese loans.
7
Risks

8. Imperatives for Nigeria
8
Under current revenue and Debt Service
profiles, Government cannot fund
infrastructure projects on its own.
Nigeria has a huge infrastructure deficit
(new and rehabilitation of existing ones).
The optimal Strategy is to consider de-
risking infrastructure projects in order to
mobilise private capital from commercial
investors who may have low-moderate risk
appetites but can access large funds.
Infrastructure is an assured way to
stimulate growth (through production and
trade in particular) and create jobs.
Government may need to borrow
preferably from concessional sources such
as loans from China. However, this option
is limited due to debt sustainability
considerations.

9. THANK YOU
9