IMF cautions Nigeria against borrowing from China

Nigeria and other emerging market countries have been advised to scrutinise the terms of loans being obtained from China before accepting such facilities because of the questionable circumstance behind such loans.
The International Monetary Fund (IMF) Director, Monetary and Capital Markets Department, Tobias Andrian, who spoke at the ongoing IMF/World Bank Spring Meetings, said such countries should first consider the terms of such facilities, especially, their compliance with the Paris Club arrangements.
According to Andrian, there was nothing bad in borrowing from China, except that the terms of such loans are always questionable.
“Loans from China are good, but the countries should consider the terms of the loans. And we urge countries that when they borrow from abroad, the terms are favourable for the borrower, and should be conforming to the Paris Club arrangements.
“Let me reiterate that in many frontier markets, we see that the share of debt that is not conforming to the Paris Club standards is on the rise. And that means that if there is any debt restructuring down the road one day, that can be very unfavourable to those countries. So, the borrowing terms, the covenants, are extremely important. And we do see a deterioration in that aspect.”
Nigeria's total public debt at the end of last year stood at 24.39 trillion naira .
Borrowing from China represents 8.5 percent of Nigeria's total external debt, but are mainly concessionary terms.
Andrian said Nigeria has been borrowing from international markets, which gives the IMF some worries, saying however that such loans are good as it allows the country to invest more, but expressed concerns over rollover or repayment risks going forward.
“At the moment, funding conditions in economies such as Nigeria and other Sub-Saharan African countries are very favourable but that might change at some point. And there is risk of rollovers and whether these need for refinancing can be met in the future,” the IMF director said.
He advised that Nigeria should seek higher capital for its banks through recapitalization and also tackle rising non-performing loans in the sector.