China’s reluctance to continue lending affects major Nigerian projects, communities

Each time Clever Amada, a rice farmer in Bayelsa State, needs to use the mill, he travels to neighbouring Delta State, and sometimes as far as Ebonyi, to use private mills.
That would not have been his fate had the plan by the Muhammadu Buhari administration in 2016 to set up 40 parboiled rice processing plants been executed. But the $326 million project did not see the light of day because China’s Exim Bank, which was to be the major funder, never released the loan for the project.

“In Bayelsa, we don’t have a standard mill,” said Mr Amada, who is also the secretary of Rice Farmers Association of Nigeria (RIFAN) in Bayelsa.

“In Rivers State, there is no standard mill. In Akwa Ibom, I don’t know but from my conversation with colleagues, Akwa Ibom doesn’t have a standard mill as well, and also Calabar (Cross River). So in the whole of the South-south region, there is no standard rice milling plant.”

Mr Amada said the proposed rice processing plants would have eased the challenges of rice farmers.

“If this project was implemented, rice farmers and processors would have benefited so well. It would have reduced milling stress for farmers in the state and even across the country,” he said.

Helen Bimalayegha also cultivates rice in the South-south state.

“As a rice processor, it is not easy to do the milling here, anytime I want to process rice, I always have to go to a location close to Rivers State, and it is always stressful. If there is any around here, it would make rice production easy for us,” said Mrs Bimalayegha.

China became Africa’s biggest bilateral lender over the last two decades, with Chinese public and private lenders accounting for 12 per cent of the continent’s $696 billion foreign debt by 2020. Nigeria alone owed China $4.29 billion as of December 2022, up from $1.39 billion in June 2015, according to the Debt Management Office (DMO).

However, in the last three years, Chinese creditors have appeared less willing to lend to African nations. As they pulled back, so have critical projects they were meant to finance.

“Loan reversals have hindered the drive to provide critical developmental projects, including in the agricultural sector, in Nigeria and elsewhere. That has implications for development and communities,” said Anietie Umoren, a senior research fellow at No Hunger Food Bank, a food research and aid organization.

Failed, Abandoned projects

The failed rice project is only one of many that failed to take off or stalled for lack of funds. China has not released promised funding for two major railway projects in Nigeria: a $5.3 billion railway project from Ibadan to Kano, and the $3 billion reconstruction of a 1,000 kilometres rail line between Port Harcourt and Maiduguri.

In both cases, Nigeria had provided 15 per cent of the project funding, allowing China Civil Engineering Construction Corporation to start laying track. But without the 85 per cent from the Chinese government, progress can only happen if Nigeria funds the project from its budget or gets the money elsewhere.

“The Abuja–Kano and Port Harcourt–Maiduguri projects are ongoing but there is the challenge of the 85 per cent foreign loan yet to be secured. We have been driving these two projects solely through appropriation, which is part of the 15 per cent which Nigeria is supposed to contribute,” Nigeria’s former transport minister, Mu’azu Sambo, said last year.

Chinese funding for the Abuja light rail project also stalled, with $157 million in promised funding not forthcoming years after it was agreed upon.

The China Exim Bank had also promised to provide $183.62 million and $208.90 million for “ancillary” and “incremental” projects related to the expansion of four Nigerian airports. However, as of December 2021, two years after the agreement was made, the funding had not been released, according to the DMO.

The airports has already been expanded with a Chinese loan of $500 million and a counterpart funding of $100 million from the Nigerian government. However, the Lagos and Abuja terminals need additional work. Existing installations, buildings, and equipment need to be demolished, refitted, and rebuilt at other locations at a significant cost in order to expand the terminals for full operations.

Former Minister Hadi Sirika said the problem was “foundational” and had changed the masterplan for the airports. He explained that the original plan did not take into account the additional work, power, and water supply that would be required.

He also said that it was discovered that the terminal building would block both the control and fire towers. As a result, additional work is needed to connect the new terminal to the existing one and to expand the apron to accommodate larger airplanes.

Why China scaled back

The Chinese Embassy in Abuja did not respond to phone calls and email enquiries on the official reasons for the Chinese government’s actions. However, analysts say China’s reluctance seems to indicate a reduced appetite to fund commercially risky projects, analysts say.

The UK think tank Chatham House said in a report that Chinese authorities now seek greater control over infrastructure finance. “Loans are generally on a smaller and more manageable scale than before…,” it said.

Yun Sun, head of the Stimson Centre’s China programme in Washington, said China had been cutting back on lending for some time. “Especially for countries already in trouble on debt sustainability, the Chinese have tightened up the wallets,” she said in October.

The COVID-19 pandemic and the war in Ukraine made the debt problem worse.

In 2020, sub-Saharan Africa’s total external debt was $700 billion, up from $380 billion in 2012. The amount owed to official creditors, such as multilateral lenders, governments, and government agencies, increased from $120 billion to $258 billion during the same period.

In August 2022, the Chinese government announced that it had forgiven 23 loans to 17 African countries. This followed an earlier cancellation of at least 94 interest-free loans to African countries amounting to over $3.4 billion between 2000 and 2019.

While some African countries have struggled to pay China, Nigeria has met its obligations. The DMO said that as of December 2020, Nigeria received US$1,740 as a waiver for its prompt payment to EXIM Bank of China.

The former transport minister, Rotimi Amaechi, suggested in 2021 that China became hesitant with Nigeria after the National Assembly probed the federal government’s ability to pay back.

But as the various projects stalled, beneficiary communities across Nigeria are lamenting the consequences on livelihood.

Impact

Across Nigeria, abandoned projects demonstrate how the success or failure of such high stake financing deals could impact communities and end users.

Comfort Sunday, a rice farmer in Abuja, shared her difficulties when she needed to process rice at her Angwa neighborhood of the federal capital.

“To mill rice after harvesting is a problem here,” she said. “After harvesting, we always use a big pot to parboil it manually, and it takes a considerable amount of time.”

“Unfortunately, we don’t have the financial means to purchase processing machines as they are quite expensive and beyond our reach. Using the machine would be much more efficient, but the only available one is located in a distant area called Gwa Gwa, far from our location in Angwa,” Mrs Sunday said.

“Earlier this year, I went there to mill rice, and for each 100kg bag, I spent N3000. I believe the cost has increased even more now, especially given the current expensive circumstances,” she added.

The only machine at a private facility nearby is at Gwa-Gwa, 10 kilometres away.

“The journey to use the machine is both stressful and costly. If we had access to the machine locally, it would significantly alleviate the stress we face,” she said.

Nigeria’s national rice policy identifies “low access to modern processing technologies (parboiling)” as one of the problems of the sector. A part of its proposed remedies is increasing the number of trained local processors on improved parboiling technologies to 30,000 by 2030.

PREMIUM TIMES’ random survey reveals that 50kg local rice now sells for about N50,000, and smaller measurements now selling between N1000 and N1100.

According to Ebuka Nnamdi, a rice seller in Kubwa market, Abuja, the price of local rice has been rising in recent months .

“The price I am selling today, I can’t say it will be the same tomorrow, the price goes up every day. For instance, on Saturday, a quarter bag of this rice was N9000, but now, today is Tuesday, it is now N9500. The price is unpredictable,” Mr Nnamdi said.

Helen Terkeni, another rice dealer in the market, said she found it difficult to balance her account book recently due to the increase in the price of rice.

“The amount I paid last week to get goods (rice), I can’t use the same amount for new goods this week and that is how it has been in the past months, it has affected my account book.

“My suppliers said it was because of the increase in the cost of transportation, from the processing point to the market, not even the farmers,” Mr Terkeni said.

According to Aremu Fakunle, an agricultural expert at the Rice Policy Advocacy Initiative of Nigeria, having new parboiled rice processing plants in Nigeria can have a significant impact on costs as it would increase productivity, improve quality, and attract investment into the rice value chain.

“Although the 40 milling machines involved in the project are small for a country like Nigeria, I believe it can go a long way. If such machines are available, it will reduce the high cost of locally-made rice,” he said.

“Also, the project has the potential to reduce the cost of production, improve the quality of rice produced here and attract investment into Nigeria’s rice value chain,” Mr Fakunle added.

Ogechi Okebugwu, programme coordinator at Small Scale Women Farmers Association, also says insufficient milling machines affect the quality of locally produced rice. She acknowledged that such a project is good, but successful implementation and targeting real farmers, not middlemen, is crucial for positive outcomes.

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“In terms of rice processing machines, we don’t have enough milling machines and the situation has affected the quality of locally-made rice in the market,” she said.

“However, if there are plans from the government to provide these milling machines, it is a good development and we want to see this actualised. Most times this kind of project comes up, and the problem is always implementation.

“It is important to target the real farmers when implementing the project, not to put it in the hands of the middlemen who can be like political farmers,” she added.