Nigerian Government Watches on as China Fines Kenya N4.71 Billion for Defaulting on Railway Loans
- As African countries' debts matured, China, the largest creditor, now wants its money back
- Kenya, just like Nigeria, borrowed from China but is struggling to repay the interest and loan, and this has attracted a fine of N4.71 billion
- The loans were obtained in order to construct railways in Kenya, but the revenue generated was not enough to repay the loans
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Kenya has been asked by the Chinese government to pay over Sh1.312 billion(N4.71 billion) fine for defaulting on its loans.
The Chinese loans were provided to build the standard gauge railway (SGR), but the revenue generated has not been enough to repay.
BusinessDaily Kenya Newspaper reports that the country tapped over half a trillion shillings from Chinese lenders, led by the Export-Import Bank of China, to fund the construction of the SGR from Mombasa to Naivasha.
Source: Getty Images
Revenue from the railway service has fallen short of operational cost, the Nation Africa reports.
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The report showed that the operational cost stood at Sh18.5 billion in the year to June against sales from the railway service of Sh15 billion.
The report reads:
“This (Sh1.312 billion) relates to the cost of default on interest at one percent of the due amount.
"SGR posted an operation loss of Sh3.4 billion, and wired Sh22.7 billion in loan repayments in the year to June.
Lesson for Nigeria
Just like Nigeria, China accounts for about one-third of Kenya’s 2021-22 external debt service costs and is the nation’s biggest foreign creditor after the World Bank.
As of the end of June 2022, Debt Management Office, Nigeria's debt to China stood at $3.92 billion, which is 83.56% of the total debt to countries.
Although the federal government has continued to assure of debt sustainability, a look at the 2023 budget shows how burdened Nigeria is.
The Budget of N20.50 trillion was presented by President Muhammdu Buhari in which the Federal Government expects to incur a fiscal deficit of N10.78 trillion.
In fact, Nigeria’s total debt service will gulp N6.30 trillion. This is more than the oil revenue and non-oil revenue expected for 2023.
2023 budget: Buhari, Osinbajo to spend a combined N11.92bn on feeding, trips abroad
Similarly, details of the money earmarked for the foreign trips of President Muhammadu Buhari and Vice President Yemi Osinbajo have emerged.
However, the money earmarked for food items and refreshments of the duo has also been released.
According to the summation made from the budget breakdown, the duo's offices will spend a staggering N11.92bn on food and foreign trips.
Source: Legit.ng
