Business

FG: China to gulp larger chunk of $165m interest on loans

As the Federal Government projects into post-COVID-19, available records have revealed that Nigeria is expected to pay about $165 million as interest on loans to its creditors, with China receiving the larger part. According to a document on Nigeria’s Economic Sustainability Plan (ESP) from the Office of the Vice-President, Prof. Yemi Osinbajo, Nigeria is expected to pay $165 million as interest on its bilateral official debts (mostly to China) and will likely get some relief following the G20 agreement in this regard due to COVID-19 crisis.

The document also said following the country’s external financing, the country’s inter est rate payments due on outstanding Eurobonds is expected to amount to $655.48 million for the rest of 2020. According to the document obtained by our correspondent, “with regard to external financing, the overall balance is expected to deteriorate from -$2.1 billion to -$16.2 billion, leaving a financing gap of $14.1 billion. “Some of this can be met through concessional borrowing of about $7 billion from international financial institutions, but that will still leave a financing gap of $7.1 billion.

“The external debt situation is also of concern. Nigeria is expected to pay $165 million as interest on its bilateral official debts (mostly to China) and will likely get some relief following the G20 agreement in this regard. “But a greater problem will arise from interest payments due on outstanding Eurobonds, which amount to $655.48 million for the rest of 2020.” The document, titled: ‘Bouncing Back: Nigerian Economic Sustainability Plan (ESP),’ indicated that Nigeria is expected to concessional borrowing of about $7 billion from international financial institutions and despite that would still leave a financing gap of $7.1 billion in external debt for the country in its bid to avert economic crisis post-COVID-19.

Furthermore, the Federal Government explained in the document that already, members of the organised private sector had raised deep concern about the country’s rising debt portfolio following the official statistics from the Debt Management Office, which indicated that public debt stock increased by 4.5 per cent to N28.63 trillion as of March 31, 2020, from N27.40 trillion as of December 31, 2019. President of the Lagos Chamber of Commerce and Industry (LCCI), Mrs. Toki Mabogunje, in a chat with this newspaper, said: “We note the Federal Government’s resolve to raise funds locally and externally to bridge the deficit in the fiscal budget.

“The Federal Government have secured $3.4 billion and $288.5 million credit facilities from the International Monetary Fund (IMF) and African Development Bank (AfDB) respectively, while discussions are on-going for another $1.5 billion facility from the World Bank. This could possibly push the country’s debt stock to around N33 trillion by year-end,equivalent to 22 per cent of GDP. “We call for caution on the continued use of debt to meet fiscal obligations especially at a time the country is struggling to generate adequate revenue. The option of equity financing should be more rigorously explored, and it is a better and more sustainable financing strategy that could be deployed to bridge fiscal deficit.”

On the country’s inflation rate, the Federal Government’s document projected that inflation would rise to 15 per cent by the end of this year and only fall to single digits by 2023. It said: “In the optimistic scenario, and reflecting the stimulus, inflation is expected to rise to 15 per cent by the end of this year and only fall to single digits by 2023 while the cautious and pessimistic scenario will show more moderate inflation reflecting a generalised slowdown in economic activity.”

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