Nigeria rebuts China debt repayment default claims

Nigeria's Debt Management Office has unequivocally stated that the country has not defaulted on its debt repayment to China or any other debt service obligation and is fully dedicated to honoring its debt commitments to creditors. Egie Akpata, Chairman of Skymark Partners, joined CNBC Africa to discuss and shed light on the current situation. Akpata debunked false claims of default, clarifying that the outstanding bilateral debts to China amount to about $4.3 billion, which is roughly 11% of Nigeria's total outstanding debt of $41.6 billion. He emphasized that this debt is manageable and not excessively high-interest like euro bonds. Akpata highlighted that there is no factual basis for default allegations and urged that accurate information can be found on the DMO website. Nigeria has utilized concessional loans for infrastructure projects such as railway modernization and airport expansions, aiming to either generate revenue or create avenues for revenue generation. However, Akpata noted that while some projects may be beneficial, most government debts will not self-liquidate and will rely on other government revenues for repayment. Despite the debt burden, Nigeria has firmly stated its commitment to debt repayment without seeking restructuring. Akpata underscored that local currency debts can be managed through measures like increasing taxes or printing more money, emphasizing that defaulting on foreign currency debts would be a conscious decision rather than an inability to pay. He pointed out that Nigeria's debt repayments are well-spread out over time, easing immediate financial pressures. Furthermore, Akpata discussed the impact of Nigeria's debt levels on the banking system, noting that Nigerian banks in Ghana have faced challenges due to exposure to Ghanaian euro bonds and local currency bonds. He cautioned that other Nigerian banks operating in different countries may encounter similar debt-related issues in the future. Addressing concerns about Nigeria's debt-to-GDP ratio, Akpata highlighted the dynamic nature of thresholds set by governing bodies and stressed the importance of having cash flow to service debts rather than relying solely on ratios. He expressed that new administrations may adjust benchmarks to prevent breaching debt limits. Looking ahead, Akpata recommended that incoming governments focus on generating revenue to meet debt obligations and suggested passing supplementary budgets for immediate financial needs. He warned that failure to address pressing issues such as fuel subsidies could necessitate further borrowing and fiscal adjustments. Akpata discussed the proposed increase in value-added tax (VAT) and suggested that state governments directly collect VAT to enhance revenue generation. He concluded that solely raising VAT at the federal level may not significantly impact revenue collection for the federal government. As Nigeria navigates its debt repayment commitments, fiscal policies and revenue strategies will play a crucial role in ensuring financial stability and sustainability.