China in dilemma over more than $83.52bn loan to Nigeria, other African countries
The big brother role being played by China through loans to Nigeria and some other African countries may have placed the Asian country in a tight corner.
According to researchers at Chatham House, huge Chinese lending to Africa has created a dilemma where China will struggle to recoup her money while maintaining good image as a friend to developing nations. Africa’s external debt rose five-fold to $696 billion between 2000 and 2020, with Chinese lenders accounting for 12 per cent of that, according to a new report by the London-based think-tank.
Specifically, Nigeria’s external debt owed to China accounts for 83.57 per cent of its total bilateral debt as of June 30, 2022, totalling $3.9 billion, a 12.7 per cent increase from $3.5 billion in the same period last year, according to data from the Debt Management Office (DMO).
Bloomberg reported that the evolving debt dynamics with Beijing, whose lending is focused on long-term infrastructure projects, threatened to push reluctant governments into the arms of the International Monetary Fund (IMF) and World Bank for balance of payments support. While Chinese lending to Africa has been criticised by the US and other Western nations as opaque and designed to seize African assets offered as collateral, the Chatham House researchers say this is not the case.
“Far from a sophisticated strategy to expropriate African assets, profligate Chinese lending in its early phases may have created a debt trap for China — deeply entangling it with obdurate and increasingly assertive African partners,” the researchers said. China is a large creditor to Zambia, for example, which has defaulted on its debt.
It’s also made loans to other African nations struggling to meet their debt obligations, including Angola, Ethiopia, Kenya and the Congo Republic. The economic fallout from the pandemic and Russia’s invasion of Ukraine has undermined the ability of many African nations to service their sovereign debts.
The continent is heading towards a repayment crisis, with 22 of 54 nations at risk of so-called debt distress, according to World Bank and International Monetary Fund criteria.
China has been criticised for its perceived lack of engagement in the global effort to reduce developing nations’ debt burdens; US Treasury Secretary Janet Yellen has said multiple times that Beijing has become the biggest obstacle to progress.
Jose Fernandez, Under Secretary for Economic Growth, Energy, and the Environment at the US State Department, said in an interview that China needed to be more transparent about the debt owed to it by African nations. Concerned by many nations’ inability to repay their loans, Chinese institutions have in recent years slashed the amount of credit they’ll extend to Africa, Chatham House said.
New Chinese loans to African governments fell from a 2016 peak of $28.4 billion to $8.2 billion in 2019 and just $1.9 billion in 2020, during the coronavirus pandemic, the researchers said
