Controversy over Chinese loans

As the House of Representatives plans to meet with the executive over the controversial loans obtained from China, PHILIP NYAM reviews what has so far transpired and previews possible consequences


In a week’s time, the House of Representatives Committee on Treaties, Protocols and Agreements chaired by Hon. Ossai Nicholas Ossai (PDP, Delta) would host the executive team led by the Minister of Transportation, Hon. Chibuike Rotimi Amaechi over the controversy surrounding the $500 million loan to be sourced from the Export- Import Bank of China for railway lines across the country.


The bone of contention is the alleged trading off of Nigeria’s sovereignty in the contract agreement. Also, to join Amaechi is his Communication and Finance counterparts, Dr. Ali Isa Pantani and Mrs. Zainab Ahmed respectively to provide answers on the loan in question and other residual issues. They are also to provide details on the agreement signed between the Federal Ministry of Transport and the CCECC in respect of some railway projects in the country.


The projects involved are the Abuja-Kaduna, Lagos-Ibadan, Ibadan- Kaduna and Kaduna-Kano railways lines. Also, summoned alongside the ministers is the Director-General of the Debt Management Office (DMO), Ms. Patience Oniha.


The executive is to meet with the House Committee on August 17, unfailingly with details of the contracts concerned. According to Ossai, the House needs details on the agreement between the Federal Ministry of Transport and ZTE (Nig) Ltd in respect of the provision of community actions and signaling equipment for the Itakpe-Ajaokuta-Warri line.


Also, the ministers are to provide details of the agreement between the Federal Ministry of Transport and the China Railway Construction Company International (CRCCI) in respect of the Itakoe-Abuja line/New Port in Warri project.


The controversy Two weeks ago, the treaties, protocols and agreements committee at its first investigative sitting raised the alarm over alleged waiver of Nigeria’s sovereignty in the government concessions loan agreement on Nigeria National Information and Communication Technology Infrastructure Backbone Phase II Project between the government of Nigeria, represented by the Federal Ministry of Finance (borrower) and the Export-Import Bank of China (lender) dated September 5, 2018.


The committee specifically cited Article 8(1) of the agreement, which states that: “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”


But in his presentation, Hon. Chibuike Amaechi said the loan being sourced by his ministry is a total of $500 million to complete the Lagos -Ibadan railway line, which he put at a total of $849 million, with $349 million as counterpart funding.


He explained that because China, which is giving the loan, is sensitive and monitoring happenings in Nigeria, the House Committee might wish to wait till end of December when the entire loan would have been received.


Amaechi argued that the constant investigations by the National Assembly might give the impression that a part of the government does not approve of the loan and the Chinese government may withdraw the loan. Hamachi’s plea was not taken as Hon. Ossian insisted that the minister should return to the committee on August 17 with other ministers to give details of the contract agreements. He said: “We are looking for transparency, which is what the Chinese government wants. So, we will like to have the  pre-payment plans for these loans.


Most of these contracts signed by the government are not known by the National Assembly as provided for in the DMO Act; and we are supposed to know.


“We need to know how many Chinese are involved in these projects and their expertise. In the documents we have seen there are variations in interest rates. Why do you sign these documents at the same time with different interest rates?”



There is no doubt that the issue of waiving the nations sovereignty on the altar of Chinese loans has gained currency with the major opposition party, the PDP and other key stakeholders presenting various positions and advocating different measures to resolve the imbroglio.


The question in the public space is whether the Federal Government represented by Amaechi and other executive members willingly traded off Nigeria’s sovereignty for a pot of porridge or whether the House committee and other stakeholders who have expressed reservations at the loan agreement either misunderstood the process or are making a mountain out of an anthill?


Stakeholders speak As the House of Representatives continue to dig into the loans, the Alliance for Surviving COVID-19 and Beyond (ASCAB), a coalition of over 70 labour and civil society organisations (CSOs), has also stepped in and asked the Federal Government to make full disclosure of all loans it obtained.


The coalition in a statement jointly signed by Femi Falana, its Chairman,  Ayuba Wabba, President of the Nigeria Labour Congress (NLC), and Quadri Olaleye, President of Trade Union Congress (TUC) said the huge debt being incurred by the country has the potential of stifling the prospect of economic liberation and political freedom of the people. It lamented that Nigerian debt profile “which was N12.118 trillion as at May 2015 has leapt to N27.401 trillion in 2019, representing more than 100 percent debt increase”.


“The country’s level of poverty continues to increase with the skyrocketing loans obtained by the Federal Government. Poverty, extreme hunger, frivolous lifestyle of public office holders continue to fuel violence and public disorder across the country,” it said.


“Why the government has responded effectively to the needs of public officials including members of the national assembly, the economic and social needs of the people remain a mirage.” ASCAB said recent revelations at the National Assembly have confirmed that the loans were taken without proper public scrutiny.


The group alleged that within a year, the national assembly had approved a total of $28 billion for President Muhammadu Buhari with no commensurate improvement in the quality of lives of many Nigerians.


It regretted that millions of Nigerians continue to face harsh economic difficulties, lacking access to basic needs, yet the debt profile of the country continues to increase, adding that “it is even more grievous that the government continues  to take loans on behalf of the people without their consent neither their keen understanding of the terms.”


Malami, Amaechi allay fears Following the discourse generated by the controversial loan, the executive has had a tough time trying to explain that the nation’s sovereignty has not been waived.


Appearing on a TV programme recently, the Minister of Justice and Attorney General of the Federation, Mallam Abubakar Malami joined embattled Amaechi in declaring that Nigeria’s sovereignty is never at risk in the country’s loan agreements with China.


According to the duo, there is a difference between international diplomatic immunity, “which has to do with a nation’s sovereignty, independent existence’ and commercial immunity, “which has to do with a commitment to ensure repayment of loans.”


The AGF explained that the misconception is that the National Assembly is looking at the diplomatic immunity as against the commercial immunity of a country when it has to do with loans, adding that there is no concession whatsoever made as it concerns Nigeria’s diplomatic immunity.


He said: “If you talk of immunity within the context of diplomatic immunity which has the implication of the independence of a state and its institutions in its own right, there is no concession whatsoever made by Nigeria as it relates to diplomatic immunity that has to do with its independent existence as a nation, neither was any concession made as related to institutional diplomatic immunity of the Nigerian institutions.


“But when you talk of immunity within commercial context that is where I think we need to clarify issues with particular reference to the loans and commercial transactions among nations. “Concessions relating to immunity for the purpose of provision of commercial guarantee are a normal, traditional ritual. Nations enter into respective interstate agreements and in the course of so doing, surrendering their jurisdictional immunity.


“It is on account of that for example that you see Nigeria signing an agreement with other institutions or nations and agreeing to a choice of territorial jurisdiction for the purpose of determining disputes when they arise.


“So that is how eventually you see Nigeria submitting to jurisdiction for determination of a trade dispute in UK, in Paris and in other international fora or jurisdiction even when Nigeria as a nation has diplomatic immunity.”


The AGF added that the clause is a mere guarantee, a commitment that allows an advancing state (the lender) the powers to claim back an asset for the purpose of repayment of a loan and is in no way connected to the sovereignty of a country. Giving credence to the position of his colleague, Amaechi dispelled the notion that Nigeria’s sovereignty has been signed off to China in obtaining the loans. “Nobody has signed out anything.


A sovereign nation is a sovereign nation, nobody can recolonise us. We must learn to pay our debts and we are paying, and once you are paying, nobody will come and take any of your assets.” Amaechi said the previous administration cannot even be blamed for the loan or clause in the agreement because it is a standard clause.


“We will not blame President Goodluck Jonathan’s government for taking the loan, because like I said, it is a standard clause in every loan agreement. That clause enables the lending country to go to arbitration. It creates an avenue for them to be able to retrieve their funds in the case of a default.


“If therefore there’s an asset that has been mortgaged, they must be able to get to that asset. If you don’t waive that immunity, they cannot. It’s a standard clause in every international loan agreement. “If the National Assembly says we have signed out the sovereignty of our country, so why did they approve? Didn’t they see it before approving?”


DMO’s intervention The Debt Management Office (DMO) has also intervened in the raging debate providing facts and figures to justify Nigeria’s loan dealings with China.


According to the DMO, “As at March 31, 2020, the total borrowing by Nigeria from China was USD3.121 billion and this amount represents only 3.94 per cent of Nigeria’s total public debt of USD79.303 billion as at March 31, 2020. Similarly, in terms of external sources of funds, loans from China accounted for 11.28 per cent of the External Debt Stock of USD27.67 billion at the same date.


These data shows that China is not a major source of funding for the Nigerian government. “What are the terms of the loans from China? The total loans from China was USD3.121 billion as at March 31, 2020, and they are concessional loans with interest rates of 2.50 per cent per annum, with 20 years moratorium of seven years. The terms and other details of the loan are available.


“These terms are compliant with the provisions of Section 41 (1a) of the Fiscal Responsibility Act, 2007. In addition, the low interest rate reduces the interest cost to government while the long tenor enables the repayment of the principal sum of the loans over many years.


These two benefits, make the provisions for debt service in the annual budget lower than they would otherwise have been if the loans were on commercial terms”. The DMO also provided details as to what these loans are used for? “The USD3.121 billion Loans are project-tied Loans.


The projects, (eleven – 11 in number as at March 31, 2020), include: Nigerian Railway Modernization Project (Idu-Kaduna section), Abuja Light Rail Project, Nigerian Four Airport Terminals Expansion Project 2(Abuja, Kano, Lagos and Port Harcourt), Nigerian Railway modernisation Project (Lagos-Ibadan section) and Rehabilitation and Upgrading of Abuja – Keffi- Makurdi Road Project. ”


Certainly, after August 17, the truth about the Chinese loans would have been known and the report of the House committee would define a road map that may put an end to controversies regarding agreements entered into between the Nigerian government and other countries or international organisations.


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