As the House of Representatives ad hoc committee prepares to further interrogate top Federal Government functionaries on contentious issues concerning a loan deal between Nigeria and China on August 17, KUNLE ODEREMI reports on the rising tension among some stakeholders.
A report in a British tabloid in December 2006 indicated that Britain paid the final payment on a multi-billion-dollar loan it obtained in 1945 for rehabilitation, reconstruction of its infrastructure after the devastating the Second World War. According to the report, its creditors were the United States and Canada, which Britain transferred £43 million and £12 million respectively. The original loan of $4.34bn which was equivalent to £27bn as of 2006, was drawn to prevent Britain from falling into bankruptcy due to aggravated and colossal damage caused by the war on the country.
“This week we finally honour in full our commitments to the US and Canada for the support they gave us 60 years ago. It was vital support which helped Britain defeat Nazi Germany and secure peace and prosperity in the postwar period. We honour our commitments to them now as they honoured their commitments to us all those years ago,” enthused Ed Balls, then the Economic Secretary to the Treasury in Britain.
Another remarkable thing about the loan was that though it was to be repaid in 50 annual repayments starting in 1950, the British government apparently defaulted as it deferred six instalments – in 1956, 1957, 1964, 1965, 1968 and 1976 – on the grounds that international exchange-rate conditions and the UK’s foreign currency reserves made payments in those years impossible.
In the case of Nigeria, there is obvious lack of confidence by the people in their government. Not after more than 60 years after independence from Britain, the ruling class has haemorrgaed it almost to the point of death the hugely endowed county of more than 200 million population. Trillions of foreign exchange made from export earnings and illegal oil bunkering, coupled with questionable debts, including loans only enriched a few. Years of absence of transparency and accountability on the part of the authorities raise doubts on foreign borrowing by the government.
From its abundant huge deposit of crude oil, Nigeria is believed to have made in trillions of Naira from oil export. Yet, it is faced with a stifling N30 billion debt profile, with the consequence absolute poverty and widening gulf between the rich and poor, as well as unrestrained social tension. Former President OlusegunObasanjo had described debt relief granted Nigeria by the Paris Club in 2006 as a dividend of democracy that would enable the country to have an additional $1 billion to be invested on health, education, food security and infrastructural development. But successive administrations have increased the nation’s debt burden almost at a geometric proportion. Though the has been a sustained public outcry over the rising debt profile, the ongoing scrutiny of the $400 million loan deal between Nigeria and China has raised more questions on the issue. No thanks to the contention clause in the loan agreement perceived as ceding the sovereignty of the country to China in case it defaults in repaying the loan based on the terms of agreement. The contentious provision reads: “The Borrower hereby irrevocably waives any immunity on the grounds of sovereign or otherwise for itself or its property in connection with any arbitration proceeding pursuant to Article 8(5), thereof with the enforcement of any arbitral award pursuant thereto, except for the military assets and diplomatic assets.” Since sovereignty of the state belongs to the citizens of the country, the word, sovereign involved in the agreement is the Crux of the matter in the pervasive fury over the loan deal. According to reports, Chinese credit accounts for 80 per cent of all bilateral lending to Nigeria, as it provides loans to revamp critical sectors such as railway, power and airport, as infrastructure.
Since the ‘innocuous’ clause of surrendering the sovereignty was uncovered by the media, the Federal Government and Minister of Transportation, HonourableRotimiAmaechi have made frantic attempts to expatiate on the contractual agreement with China. Already, on August 11, the minister is expected to appear again before the House of Representatives Committee scrutinising the loan, especially on the terms of the agreement/collateral agreement on the loan. Nonetheless, there are three fundamental issues on the underlying ongoing public discourse and fury over the loan. One of them is the mounting debt arising from the ceaseless borrowing by the Federal Government from China, Ancillary to that is the scary immunity clause ceding the sovereignty of the country in case the country defaults. The other issue is the lack of trust and confidence in the nation’s economic and political elites who have continued to rape the system and conspire against the rest of the Nigerian population. All this has engendered fear and apprehension and tension of the ruling class mortgaging the future of the country.
However, Amaechi, is of the belief that the clauses in Article 8(1) of the commercial loan agreement signed between Nigeria and Export-Import Bank of China, in the $400 million loan for the Nigeria National Information and Communication Technology (ICT) Infrastructure Backbone Project, did not amount to ceding the sovereignty of the country in the technical sense. Instead, he said that it was providing some relief to enable China take over assets for loan recovery if and when necessary. In the words of the minister: “Most times what the Chinese does is to go after the asset that has been constructed and then use it to recover their money, so what’s wrong with that? You are asking for $5.3 billion and they are asking you to give that sovereignty that would ensure they get back their money, if you say no, what other assurance you give?
Beyond that, the chairman of the committee, Honourable Nicholas Ossai said that there are other agreements signed by the ministry of communications and digital economy that had implications for the nation’s sovereignty. “When the National Assembly reacts in this manner, to question some level of agreements being entered into by any ministry of this country with any other nation, we have every right to question that because anything that is going to happen will happen to our generations unborn. Whether we get it from China or not is immaterial,” Ossai said. “The most important thing is that we must save and protect our people as regards agreements, because most of the agreements that have been signed, the National Assembly has no knowledge. Even the details embedded in those agreements are not forwarded to you when demanding counterpart funding.” In effect, the parliament only approved a borrowing plan for the executive and not the terms of agreement, a factor that may have informed the decision of the committee to insist on forging ahead in the assignment.
Ominious signs
The apprehension of most Nigerians in relation to the clause in the terms of agreement on the loan is informed by the predicament of Zambia after defaulting on almost $6.4 billion Chinese loan as at December 2017. The lender confiscated the asset of the African country, including the Zambia National Broadcasting Corporation (ZNBC) for defaulting. Other assets like the Zambia’s national electricity company, ZESCO, and the Kenneth Kaunda International Airport, Lusaka are also at stake in the bid by China to recovery its loan.
It is also pertinent that a former President of the Nigerian Bar Association (NBA), DrOlisaAgbakoba (SAN), once expressed serious concern on the trade relationship between Nigeria and China is skewed in favour of China, with Nigeria getting nearly nothing. He opined that the bilateral relationship tended to favour China more because China saw Nigeria as a strategic market for its manufactured products. In other words, China enjoys trade surplus at the expense of Nigeria with a minute export to the Asian country.
Aagbakoba said, “The trade between Nigeria and China is so skewed in favour of China and we’re getting nothing; we’re import-dependent; everything is imported. If everything continues to be imported, where is our hope? We import toothpicks from China. I was listening to the DG of NAFDAC the other day talking about drugs; we import everything. This has just got to change.” To address the problem, Agbakoba, however, called for caution, citing the Zambian example, where China had taken over the Africa country on account of default on a loan repayment. He said: “The other day, I saw in Zambia, the head of Zambian police decorating a Chinese policeman who had taken over the Zambian police because Zambia defaulted on a loan. So, there are wider implications.”
Equally drawing from his own wealth of experience, a former Minister of External Affairs,,Akinyemi, has also spoken on the controversial loan deal between Nigeria and China. He submitted that a country could not plead sovereign immunity for defaulting on loans from international organisations or nations. Therefore, the erudite scholar and former director general of the Nigerian Institute of International Affairs (NIIA) said that it was important that borrowers painstakingly study the terms of agreement on any loan before appendage their signature. “Always get experts to interpret the terms of your agreement to ensure it will not lead you to economic slavery,” he advised. “Africa should look closely into terms of engagements. African governments should not sign agreements they cannot operate with. It doesn’t make sense to sign an agreement where the Chinese promise to give you money in Yuan whereas you are to pay back in dollars. That is an unequal term of agreement. “Ask yourself if the project will be in your favour in the future. What is the point of signing an agreement for Chinese to build a railway system with the terms paid within 20 years, when the volume of people travelling by railway in your country cannot sustain the railway system? If the income generated by the railway system can generate the loan, then go ahead, but if you know you will be unable to repay the loan, then don’t go into it. There is usually a clause in these agreements, which are standard procedures. It usually says country X cannot plead its sovereignty if there are disagreements, and you need to go to arbitration. You cannot say you are a sovereign country and cannot be dragged to the court of arbitration. That is standard procedure. Economic relations are different from standard relation.”
FG vs experts
Sometime ago, the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, had dismissed insinuations that the borrowing spree embarked on by the government posed a grave danger to the country. She believed that the country had the capacity to even borrow more to reposition strategic sectors going by Nigeria’s Gross Domestic product (GDP). Her words: “We have heard repeatedly that Nigeria is inching into a debt crisis, and we have consistently said that Nigeria does not have a debt crisis. Our total borrowing today is just under 20 per cent of our GDP while multilateral institutions project for an economy our size to borrow up to 50 to 55 per cent of our GDP. What we have is a revenue problem. Our revenue performance by half-year is 28 per cent so we have designed a strategic revenue growth initiative early this year which has three thematic areas: One is to achieve sustainability in revenue generation. Two is to identify new and enhanced enforcement of existing revenue streams and three is to achieve cohesion of our people and tools.”
The position of the minister sparked a round of debate in many circles, with a number of experts picking holes in her submission. Many of the commentators believed that she only made a political statement meant to reassure the powers-that-be that she was on top of the situation. However, in one of his regular interventions on critical national issues and debates, a former deputy Governor of the Central Bank of Nigeria (CBN), Obadiah Mailafiya called for caution. The Development Economist, who was one of the eminent persons that was involved in the negotiation of Nigeria’s debt relief in 2005, highlighted a few sore points in the seeming Greek gift from China. He said the ‘benefits’ in the so-called Chinese loans skewed substantially against Nigeria because: “Most of the funds given out actually go back to them by way of supplies, construction contracts with all the equipment brought over from China itself.”
How the House committee handles all issues that have been thrown up concerning the contentious loan will be instructive when Amaechi, along with a couple of other ministers appear before it on August 17.
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