It was at the investigative hearing into the agreements signed between Nigeria and China by the House of Representatives Committee on Treaties and Agreements that the controversial clause that purportedly ceded Nigeria’s sovereignty to China was uncovered.
Ossai Nicholas Ossai observed during the session that the Federal Ministry of Finance (borrower) on behalf of Nigeria and the Export-Import Bank of China (lender) on September 5, 2018, signed loans agreement that the terms were anti-Nigerian sovereignty. He made a particular reference to 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.”
This clause caused uproar across Nigeria, with a lot of Nigerians calling for the review of the terms of the agreement. Some Nigerians cited examples of Sri Lanka, The Gambia and other countries, where they have lost their national assets to China over failed debts when that particular clause was invoked. Some of the assets included the ports and airports, assets that are critical to national security.
Some of the loans Nigeria is taking from China are also being invested in airport terminals, telecommunication, railways facilities, power and ports facilities – all critical to the national security assets. Statistics by the Debt Management Office (DMO) showed that as at March 31, 2020, the total borrowing by Nigeria from China was $3.121billion. This amount represents 3.94 per cent of Nigeria’s total public debt of $79.303billion as at March 31, 2020. It said further that in terms of external sources of funds, loans from China accounted for 11.28 per cent of the external debt stock of $27.67b at the same date.
These data show that China is not a major source of funding for the Nigerian government. According to the DMO, the loans are concessional, with interest rates of 2.50 per cent p.a, tenor of 20 years and grace period (moratorium) of seven years. The DMO also said these terms were compliant with the provisions of Section 41 (1a) of the Fiscal Responsibility Act, 2007.
The DMO said 11 projects were tied to the loans as at March 31, 2020. Some include: Nigerian railway modernisation project (Idu-Kaduna section); Abuja light rail project, and Nigeria’s four airport terminals expansion projects (Abuja, Kano, Lagos and Port Harcourt); Nigerian railway modernisation project (Lagos-Ibadan section) and rehabilitation and upgrading of Abuja-Keffi-Makurdi road project, among others. Specific to the Buhari government, the total debt obtained from China is $1,728,140,000.
The debts based on the DMO schedule of China debts as at March 31, 2020 seen by our correspondent show that this government have accessed funds on the Nigerian railway moderninisation project (Lagos-Ibadan section) and the Nigeria rehabilitation and upgrading of the Abuja-Keffi-Makurdi road project. On the Nigerian railway moderninisation project (Lagos-Ibadan section), the total loan amount is $1,267.32, taken on August 18, 2017. The interest rate per annum is 2.50 per cent.
It has 20 years tenor. The amount disbursed so far to Nigeria stands at $759.84m, which represents 59.96 per cent. The outstanding amount is $759.84m. On the rehabilitation and upgrading of Abuja-Keffi-Makurdi road, the total amount is $460.82m, agreed on August 18, 2017 at the same terms as above. The amount disbursed so far is $80.64m (17.50%), with 80.64 per cent amount still outstanding.
So, out of the total China loans taken during the administration of President Muhammadu Buhari, only $767,904,000 has been disbursed, while $960,236,000 is still outstanding.
The director-general of the DMO, Patience Oniha, told our reporter on phone that Nigeria had not accessed all the funds because the project financing was tied to milestones. She noted that Nigeria would only pay interests on the amount that had been disbursed. While the debts figures are within comfortable limits, Nigerians raised concern, not on the amount but the terms under which those loans were obtained; and close to $10bn loans are still being prospected from China.
The Minister of Justice and Attorney-General of the Federation, Abubakar Malami and the Minister of Transportation, Mr.Rotimi Amaechi have maintained that Nigeria’s sovereignty hasn’t been signed away to China. They explained that what has been signed away is commercial sovereignty or commercial immunity. What that means, according to them, is that if Nigeria defaults, China has the right to seize those assets their funds have been invested in, operate same until they recoup their funds.
They, however, haven’t explained the terms. How long would China operate the assets, and who will define the terms? China has signed up to 50 years in other similar deals elsewhere. Again, in what state would China return the assets? Would they be returned as scrap?
There is also the question on if China says the asset they invested in isn’t profitable enough for them to recoup their assets, does the agreement allow China to take any other Nigerian profitable asset, home or abroad? Speaking to this on Arise TV Morning Show on Thursday, Adeshina Ogunlana, a lawyer and former chairman of the Nigerian Bar Association (NBA), Ikeja branch, opined that the agreement indeed gives China the leeway to go after any asset belonging to Nigeria, regardless of the assets their funds were invested in.
He said the only exception, based on the clause, is the Nigerian military and diplomatic assets. According to Minister Amaechi, why should Nigeria worry about losing their sovereignty when the debts will be repaid? “We must learn to pay our debts. And we are paying. Once you are paying, nobody will take any of your assets,” he told NTA recently. He was also quoted as saying that Nigeria had already paid $96m out of the $500m loan taken from China to fix the Abuja-Kaduna rail project.
He also noted that Nigerians should care about the potential economic impact the loans would have on the economy instead of just criticising. He said transportation infrastructure was critical to every country’s development. He said the Abuja-Kaduna rail project was already impacting positively on the citizens, especially travellers on that corridor. He also said that when completed, the Lagos-Ibadan rail project would impact positively on the Apapa traffic, congestion at the ports, as well as movement of commuters on the Lagos, Ogun and Oyo axis. Speaking further on the repayment plan, the minister said, “We have already opened an escrow account to pay in the money.
The minister of finance sent me the account details for the Nigerian Railway Corporation (NRC) to start paying in the money. So, if we are making N100m and are running with N90m, we can start paying N20m to N30m monthly; and before we know it, we can raise $1m we can send to the minister of finance to pay as our contribution.” The director-general of the DMO further explained that debt service is provided for in the budgets. She said debt service external column in the budget included all foreign loans.
She also noted that since some of those projects financed by the loans are revenue- generating, they should generate money to pay the loans like the Abuja-Kaduna rail project. She, however, noted that probably because the NRC is not charging commercial rates, government would have to make additional provision for the repayment of the debts. Commenting, Uche Uwaleke, a professor of finance and capital market at the Nasarawa State University said, “The fact is that China can only take over a country’s assets built with the loans, which served as collateral security. The relevant clause usually invoked in the event of default relates to waiver of commercial sovereignty, which is a standard clause in bilateral loan agreements of this type.
” He noted that as a non-aligned creditor country not belonging to the Paris Club of creditors, China needs such a sovereign guarantee in bilateral commercial deals to facilitate enforcement of loan terms. Prof Uwaleke, who is also a fellow of the Chartered Institute of Bankers (CIBN), noted that adequate provisions had been made for the servicing of public debts, the bulk of which about 65 per cent is domestic.
There is no denying the fact that relying on budgetary provisions alone will not go far in bridging the huge infrastructure gap in the country. According to Uwaleke, “In view of the increasing cost of domestic loans and their crowding out effect on the economy, the drying up of facilities from multilateral sources, the resort to bilateral loans from China, seem in order, especially when such loans are concessional and project-tied.
” He said the upgrading of the Abuja and Lagos airport terminals, the Abuja-Kaduna, Warri-Itakpe railways and Lagos-Ibadan railways were all projects with a positive impact on the economy. The impact of China loan-enabled projects will become significant by the time the planned Lagos-Kano, Port Harcourt-Maidugiri and the Mambila power plant projects are completed, he noted. “I see these leading to a quantum leap in gross domestic product growth, reduction in inflation rate, spike in foreign direct investments, stabilisation of exchange rate, and significant reduction in unemployment rate. Moreover, it will rub off positively on the capital market as quoted companies cost of production drop,” he said.
