Business
First China Default Seen as Record $427 Billion Debt Due
BEIJING – Chinese company debt twice the size of Ireland’s economy will come due in 2014, spurring concern the nation is on the cusp of its first corporate bond default.
A record 2.6 trillion yuan ($427 billion) of interest and principal on securities issued by non-financial companies must be repaid next year, 19 percent more than this year and the most since China International Capital Corp. began compiling the data in 2008. Ten-year AAA corporate bond yields surged 89 basis points since Dec. 31 to 6.18 percent, touching a record 6.23 percent on Nov. 27. That compares with a 70 basis-point rise to 2.68 percent for similar-rated notes globally.
People’s Bank of China Governor Zhou Xiaochuan’s signal the central bank will act to prevent excessive leverage has contributed to the surge in borrowing costs and forced many firms to delay financing plans. Rising interest rates may cause a “partial debt crisis to explode,” the official China Securities Journal said in a Nov. 26 editorial.
“The probability of default will get much higher in 2014 as maturing debt reaches a record,” said Shi Lei, the Beijing-based head of fixed-income research at Ping An Securities Co., a unit of the nation’s second-biggest insurance company. “The central bank’s policy of controlling leverage, which may last a long time, will crowd out companies with bad credit profiles and, ultimately, help restructure the economy.”
Sales Pulled
Bond sales by Chinese companies are down 23 percent to 1.57 trillion yuan this half-to-date compared with the first six months of the year, according to data compiled by Bloomberg. Companies postponed or scrapped 96.1 billion yuan of bonds in November compared with 29.8 billion yuan the month prior, according to filings on the websites of Chinamoney, Chinabond and Shanghai Clearing House.
The 2.6 trillion yuan of debt due next year consists of a record 2.13 trillion yuan of notes which must be redeemed, and a record 470 billion yuan in interest, the CICC data show. Investors also have options to sell some 200 billion yuan of bonds back to issuers, according to CICC.
Prominent Problems
There have been no defaults in China’s publicly traded domestic debt market since the central bank started regulating it in 1997, according to Moody’s Investors Service. Guosen Securities Co. estimates Chinese non-financial companies’ debt ratios reached 93 percent last year, while the average in Asia hasn’t surpassed 70 percent in the last 10 years, according to a report released on Dec. 2.
The central bank warned on Nov. 5 the economy may see a decline in leverage over a long period, and said there are “prominent” problems in local government and property industry borrowings. China’s broad debt ratio has also been rising sharply, PBOC Deputy Governor Hu Xiaolian said on Nov. 20.
Following the Communist Party’s Nov. 9-12 plenum, China’s leaders pledged to allow market forces a “decisive” role in the allocation of resources. Societe Generale SA China economist Yao Wei said the announcement signals the government may stop saving troubled companies which can’t meet debt obligations and allow the first bond default in the coming 12 months.
‘Doomed Companies’
“If the government is going to let market forces play an important role, it should let those doomed companies fail,” said Yao in Hong Kong. “In industries with overcapacity, such as steel and shipbuilding, there’s a higher likelihood of bond defaults.”
Credit risks are most concentrated in highly leveraged sectors, including heavy industries, according to Ping An’s Shi, who said rising borrowing costs will begin to have a “real effect” on the world’s second-largest economy next year. Corporate bond yields may rise to even higher levels in the first half of 2014, he said.
Xinyu Iron & Steel Co. (600782), a Jiangxi-based steelmaker which reported a loss of 175 million yuan for the January to September period, has 3.25 billion yuan of borrowings due in 2014, compared with 0.31 billion yuan in 2013, according to data compiled by Bloomberg. The yield on the company’s AA+ locally rated 2016 debt has almost doubled this year to 10.5 percent as of Dec. 6, according to exchange data.
The yield on five-year AA rated corporate bonds has risen 125 basis points this year to 7.26 percent, according to Chinabond. The rate on similar-maturity government debt climbed 116 basis points to 4.39 percent. The gap widened 8 basis points to 287.
Debt Burdens
“Companies are facing heavy debt burdens and cash supply is tight. All these factors will make bond defaults very likely,” said Dong Hui, a bond analyst at China Securities Co. in Beijing. “But it’s hard to judge whether the first will happen next year. After all, no local governments want companies in their localities to be the first to default.”
Electricity companies have to repay 520 billion yuan in bond principal and interest next year, the most among all industries, according to CICC, which took out third place for fixed-income research in New Fortune magazine this year. That’s followed by local government financing vehicles, which must repay 239 billion yuan.
As default concerns escalate, the cost of insuring the nation’s debt against non-payment is edging higher. China’s credit-default swaps increased 2.1 basis points last week to 67.5 as of Dec. 6, according to data provider CMA. The swaps rose 1.4 basis points the week prior, advancing for the first time since the five days ended Oct. 25, the data show.
Cash Supply
The yuan advanced to the strongest level in 20 years today after the central bank raised the currency’s daily fixing to a record and the nation’s trade surplus widened to the biggest in more than four years. It rose 0.15 percent to 6.0726 per dollar as of 10:04 a.m. in Shanghai, China Foreign Exchange Trade System prices show.
Guotai Junan Securities Co. Shanghai-based bond analyst Li Qing said China’s slowing economy will also increase default probabilities next year. Guotai Junan, the nation’s third-biggest brokerage, forecast economic growth will slow to 7.3 percent next year, from 7.6 percent in 2013.
“Cash supply will probably remain tight and the economy may decelerate from the second quarter of next year,” said Li. The premium on bonds rated AA or lower may widen further, she said.
SocGen’s Yao said some companies averted defaults in 2012 because local governments stepped in to help. CHTC Helon Co., the fiber maker which used to be called Shandong Helon Co. (000677) and became the first company to lose its investment-grade rating in December 2011, repaid 400 million yuan of bonds in April 2012 even as it failed to make loan repayments.
“Whether there’ll be a bond default or not is mostly a political decision,” said Yao. “Huge maturing debt and cash shortages provide conditions for the first default to happen. But whether it will depends on the leadership’s willingness to make the right choices.”
– BLOOMBERG
The Nigerian National Petroleum Company Limited (NNPC Ltd) claimed that it saved $3.4 billion through contract restructuring and optimisation between April 2025 and July 2026.
Group Chief Executive Officer, Bayo Ojulari, made the assertion in Abuja at the opening of the 25th Nigeria Oil & Gas (NOG) Energy Week, while highlighting the impact of ongoing reforms aimed at improving operational efficiency, reducing costs, strengthening partnerships, and enhancing value delivery to the federation.
Ojulari also stated that the national oil company had maintained full compliance with its joint venture cash call obligations.
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According to the scorecard presented by the NNPC Ltd, the $3.4 billion cost savings were realised through contract restructuring and optimisation initiatives across the company’s operations.
The reforms also contributed to an increase in government revenue, with the NNPC Ltd reporting a government take of N19.5 trillion, representing a 21.8 per cent year-on-year increase.
Besides, a major highlight of the report was NNPC’s 100 percent compliance with its joint venture cash call obligations across all its joint ventures from Financial Year 2025 to June 2026.
However, the company’s partners recorded a blended compliance rate of just 61 percent.
Of the 27 joint venture partners, only six were fully current with their obligations, while 13 recorded partial compliance with an average payment rate of 72 percent, and eight remained in significant default, paying an average of only 14 percent, prompting Joint Operating Agreement remedies.
The NNPC Ltd said it remained committed to sustaining its cash call obligations to support Nigeria’s target of achieving two million barrels of oil production per day.
Operationally, the company reported a six percent increase in crude oil production year-on-year and an 8.1 percent rise in gas production over the same period, reflecting improvements in upstream operations.
Ojulari also highlighted several strategic partnerships concluded since the last Nigeria Oil and Gas Conference, including a long term gas supply agreement with Nigeria LNG, progress on deepwater investments valued at over $20 billion, refinery related partnerships, industrial gas projects, and new gas supply arrangements.
Looking ahead, the company identified seven priority projects expected to drive production and gas infrastructure growth through 2027.
These, it said, included the UTM Floating LNG project, the OB3 East West Connector, the AKK gas pipeline, refinery technical enhancement projects, the Zabazaba deepwater development, the Owowo field, and the BSWAP project.
The state oil major added that the combination of cost optimisation, stronger operational performance, improved infrastructure reliability, and strategic partnerships would reinforce Nigeria’s energy security, boost government revenues, and support sustainable growth in oil and gas production.
Ojulari said the national oil company achieved 98 percent recovery across five crude export terminals between April 2025 and May 2026, up from one per cent at Bonny in June 2022.
He put current output at 1.71mbpd, the highest in five years, with the NNPC Exploration and Production Limited (NEPL) hitting a record 365,000 bpd.
Gas production, he said, reached 7.5 billion standard cubic feet per day (bscf/d) following the River Niger crossing on the Ajaokuta-Kaduna-Kano (AKK) Pipeline and inauguration of the ANOH Gas Plant.
Ojulari added that the NNPC Ltd had “zero tolerance for partners who are not able to fund their Cash-call” and had begun invoking default clauses.
He stressed collaboration over control, saying, “We have rid ourselves of any pseudo-regulation. We are not the super-regulator. Let them regulate. We want to work.”
Energia Limited and its Joint Venture partner, Oando Plc, have inaugurated the board of trustees of the Ndokwa West-1 Host Community Development Trust (HCDT).
The inauguration marked a significant milestone in strengthening sustainable development, transparency and community participation across their host communities in Delta State.
The inauguration, held in Asaba, also featured the signing of a Memorandum of Understanding (MoU) between the Energia-Oando Joint Venture and the seven host communities, in line with the provisions of the Petroleum Industry Act (PIA), 2021.
The event brought together representatives of Delta State Government, Nigerian Upstream Petroleum Regulatory Commission (NUPRC), traditional rulers, community leaders, members of the newly inaugurated board of trustees, and other key stakeholders from the oil and gas industry.
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Representing the Governor of Deputy Governor, Delta State, Sir Monday Onyeme, Deputy Chief of Staff, Hon. Christopher Osaskwe commended Energia Limited and the host communities for successfully establishing the Trust and signing the Memorandum of Understanding.
He described the initiative as a demonstration of mutual commitment to partnership and sustainable development, while urging the newly inaugurated board to discharge its responsibilities with transparency, accountability and fairness.
He also encouraged host communities to continue protecting oil and gas infrastructure and embrace dialogue as the preferred approach to resolving disputes.
Managing Director, Energia Limited, Oladimeji Bashorun, described the inauguration as the beginning of a new chapter in the relationship between Energia and its host communities.
According to him, the company remains focused on building partnership, shared responsibility and sustainable development rather than dependency.
He noted that while the PIA provides a structured framework for host community development, Energia’s commitment to its host communities predates the legislation and has remained a core part of the Company’s operating philosophy since it achieved First Oil in 2009.
“Communities that host our operations should also share meaningfully in the opportunities created by those operations. Our success has always been closely connected to the success of our host communities,” Bashorun said.
He also disclosed that Energia has invested over N15.94 billion in community development initiatives since inception, supporting roads, drainage systems, healthcare facilities, educational programmes, scholarships, youth empowerment, solar-powered street lighting, community welfare initiatives and other social investments across its operational communities. He added that the Company dedicates 3% of its gross revenue annually to support sustainable development initiatives for its host communities.
Also speaking at the event, the Asset Manager of Oando, Seyi Fawora, reaffirmed the Joint Venture’s commitment to implementing the HCDT, noting that the partnership remains focused on building stronger, mutually beneficial relationships with host communities.
The representative of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Engr. Dennis Eyitemi, described the inauguration as a significant milestone in strengthening host community participation in development. He urged members of the Board of Trustees to remain accountable, transparent and committed to promoting the long-term welfare of the communities they represent.
Providing an overview of the HCDT framework, the Delta State Solicitor-General and Permanent Secretary, Ministry of Justice, Omamuzo Irebe, SAN, commended Energia for contributing beyond the statutory requirement prescribed under the Petroleum Industry Act and encouraged members of the Board to place community interests above personal interests while ensuring prudent management of the Trust’s resources.
The ceremony concluded with the swearing-in of the members of the Ndokwa West-1 Host Community Development Trust Board of Trustees. In his acceptance remarks, the Chairman of the Board, Chief Godwin Edeme, pledged the Board’s commitment to working with Energia Limited, Oando Petroleum Development Company and all stakeholders to ensure the effective implementation of the Trust for the benefit of present and future generations.
The establishment of the Ndokwa West-1 Host Community Development Trust represents another milestone in Energia’s long-standing commitment to responsible operations, stakeholder engagement and creating shared value for its host communities through sustainable, transparent and inclusive development. About Energia Limited
Energia Limited is a leading indigenous Nigerian exploration and production company with a proven track record of responsible hydrocarbon development and sustainable value creation. Since achieving First Oil in 2009, Energia has remained committed to operational excellence, environmental stewardship, and meaningful partnerships with its host communities, delivering lasting social and economic impact alongside its business growth.
Foreign direct investment (FDI) flow into Nigeria climbed to roughly $4 billion last year, according to UNCTAD’s World Investment Report 2026.
The report stated that “Inflows to Nigeria rose to about $4 billion, supported mainly by oil and gas–related IPF deals, including a major project valued at about $2 billion.”
The report indicated that Nigeria’s inflows were $1.6 billion in 2024, before increasing to roughly $4 billion (precisely $4.005 billion) in 2025 — reversing a downward trend that had seen inflows dip as low as $895 million in 2022. The figures place Nigeria among a cluster of West and East African economies that bucked a broader continental slowdown
According to the report, Nigeria’s outward investment also rose, from $408 million in 2024 to $1.19 billion in 2025, while its inward FDI stock reached nearly $93 billion by year-end.
“In Nigeria, deals included the sale of Shell’s onshore oil assets to the Nigerian consortium Renaissance Africa Energy and the acquisition of Lafarge Africa by Huaxin Cement of China, signaling both a wave of asset localization in the oil sector and continued Asian appetite for Nigerian industrial assets.
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On the Greenfield side, conglomerate Dangote Group emerged as an outward investor in its own right, backing a $3 billion chemicals project in neighboring Ethiopia — one of the 10 largest Greenfield projects announced across the continent in 2025.
Policy shifts also featured prominently in the report’s account of the investment climate. It noted that the government introduced sweeping fiscal reforms during the year, including a new minimum tax regime aligned with international standards.
“Nigeria, for instance, introduced a minimum effective tax rate of 15 per cent for multinational enterprises with revenues exceeding €750 million,” the report noted.
Alongside this, the report observed that Nigeria, together with Cameroon, moved to tighten incentive structures more broadly, as the two countries “replaced broad tax exemptions with tiered tax credits and strict eligibility requirements, such as job creation, local value addition and priority sectors.” Separately, the government rolled out targeted relief for the petroleum sector, introducing “performance-based tax credits for companies in the upstream petroleum industry, linking fiscal benefits to cost efficiency.”
The report also credited Nigeria with using regulatory innovation to court investors beyond the extractive sector.
It pointed to the Federal Government ‘s technology-focused reforms, noting that Nigeria “has used regulatory frameworks to reduce uncertainty for innovative firms,” citing the Startup Act and accompanying central bank rules that let sandboxes allow start-ups to test products with real users before facing the full weight of regulation.
On trade infrastructure, the report named Nigeria as one of five countries — alongside Côte d’Ivoire, Benin, Ghana and Togo — that committed under a regional agreement to harmonising customs and border procedures along the Abidjan–Lagos corridor, part of a wider West African push to cut transit times and integrate cross-border trade.
Africa as a whole, according to the report, saw FDI inflows fall sharply from an exceptional 2024, but the report noted that in West Africa, investment “rose in several West African economies, supported mainly by investment in natural resources and energy.”
Courtesy – The Punch
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