Lagos - The loan Nigeria is almost certain to
secure from China for the refurbishment of infrastructure is welcome but could
exacerbate the former’s debt load.
This is the view of a financial markets think-tank ahead
of the China/Africa Cooperation (FOCAC) scheduled for South Africa from Friday.
It has been reported President Muhammadu Buhari and his
Chinese counterpart, Xi Jinping, would meet to discuss the possibility of China
funding major infrastructure projects that have been stalled by inadequate
China has expressed interest in funding several projects
including a coastal railway project linking Lagos with Calabar.
Rand Bank Merchant Bank (RMB) warned of the consequence
of the loan.
“The upshot is that the loan agreement would increase
Nigeria’s debt burden. Although the state has the capacity to borrow
externally, it runs the risk of breaching the ceiling on its debt service to
Nigeria's total internal and external debt stock stood at
N12,06 trillion ( $63,5 billion) as of the beginning of the year.
However, the firm said such requests for loans were
Also Read: China envisaged to fund stalled Nigeria projects
“The president’s appeal for funds to his Chinese
counterpart for development spending reflects Nigeria’s current fiscal quandary
— declining revenues and bloated recurrent expenses have crowded out capital
expenditure,” RMB said in its international markets update on Thursday.
The firm said the need for infrastructure finance in
Nigeria was unquestionable with road, rail and power networks are in severe
decline, inhibiting long-term sustainable growth.
FBN Capital meanwhile said when compared to its West
African peers, Nigeria's infrastructure networks compare favourably.
“However, the condition of its transport network is poor.
This has impaired national connectivity,” said an FBN Capital analyst.
He pointed out the Government recently revealed plans to
set up a US$25 billion infrastructure fund to bridge the funding gap in
The infrastructure gap is wide with the most significant
gaps seen in power, housing and broadband penetration.
“While the FG's plans are laudable, the $25
billion figure is a fraction of the $100 billion deficit estimate according
industry sources,” said the analyst.
- CAJ News