2023: Amaechi resigns as transportation minister
Amaechi

By OBINNA EZUGWU

Over the past few days, apprehension has grown over the possibility of Nigeria losing its sovereignty to China on account of loans. This was particularly prompted by an alarm raised on Tuesday by members of Nigeria’s House of Representatives to the effect that they uncovered clauses in a loan collected from China that cede Nigeria’s sovereignty to the Asian country.

Chairman of the House Committee on Treaties, Protocol and Agreements, Ossai Nicholas Ossai, who raised the alarm while probing loans received by the government, had noted that the clauses in Article 8(1) of the commercial loan agreement signed between Nigeria and Export-Import Bank of China allegedly concedes sovereignty of Nigeria to China in the $500m loan for a number of projects in the country, particularly rail lines being handled by the ministry of transport under former Rivers State governor, Chibuike Amaechi, the minister.
The controversial clause in the agreement signed by Federal Ministry of Finance (borrower) on behalf of Nigeria and the Export-Import Bank of China (lender) on September 5, 2018, provides 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.”

Following this, there have been growing concerns, with some commentators going as far as accusing the government of President Muhammadu Buhari of attempting to “sell Nigeria to China.”

Part of this concern is understandable. Government officials are known to sign deals with foreign nations and companies without doing due diligence, the P&ID contract scandal being a case in point. But more importantly, there is growing worry over Nigeria’s increasing foreign debt profile, which at the moment, stands at over $27 billion and still rising. This has continued prompt fears of a debt trap. And China, which already has a reputation for seizing assets of debtor nations unable to pay back debts, accounts for about 11 percent of this total.

China, in recent years, has become one of Africa’s largest creditors, lending billions of dollars to Nigeria and other governments on the continent to build roads, railways and ports in loan deals viewed with skepticism. The Asian country has become the single largest bilateral financier of infrastructure in Africa, giving out over $152 billion worth of loans between 2000 and 2018 according to China Africa Research Initiative (CARI).

Though Nigeria’s indebtedness to China remains relatively at about $5billion, over the last decade, Nigerian government has resorted to loans from China, seeing them as viable alternative funding sources, better than those from the West which come with harsher conditions. But the Chinese loans, though come cheaper, is often alleged to have hidden baggage. It is this existing suspicion that the allegation of potential loss of sovereignty has played into. And for analysts, the concerns are not entirely out of place.

“Some countries are beginning to reject loans from China. Kenya has done so. Ghana has also done so because the experience of Zambia is very clear. And sooner or later, Ethiopia will face the same problem. These are countries that are heavily indebted to China. And if you look at it, Nigeria is also heavily indebted to China because Nigeria is now second in terms of where China has invested hugely in Africa,” said Dr. Vincent Nwani, Lead Consultant at Kavind Ltd.

“It’s just because of the size of our economy that we are not feeling it the way Zambia, Botswana, Kenya and so on are feeling it. So, it’s a bubble that will burst soon if we continue the way we are going. Over the last ten years, our debt to China has grown by over 250 percent and that’s really worrisome.”

Dr. Nwani went on to emphasis that for those unable to pay back, “seizing assets is part of it. We have seen it happen in Zambia and Kenya. And that is bad because it has impact on national security. When somebody sizes your airports and your rail lines or a major market, you know the implication of that.

“In some countries, they are already part of the security system because they have to be part of the security to secure their investment. And some of those loan agreements, the details are not made known to Nigerians, that’s another issue. And a lot of the time, money doesn’t change hands. China doesn’t pay money into our central bank. All they know is that if you say this project will cost $1 billion, they will supply all the materials from China and also bring people from there to fix them. So, these loans are not even strengthening our reserves and there is no technology transfer. They bring the equipment and they construct, they even do the maintenance. It’s a loss for us on all fronts.”

Dr. Nwani’s concerns is one widely shared by Nigerians, and like him, most experts agree that Nigeria’s debt is assuming very worrying proportions. However, while the concerns about Nigeria’s rising debt profile are justified, particularly the prospect of losing assets in the event of inability to pay back, the alarm over potential loss of sovereignty to China, experts say, is exaggerated as such is not remotely possible.

“What a waiver of sovereign immunity implies is that the defence of sovereign immunity cannot be raised by the debtor – nation in arbitral or judicial proceedings, wherever held, to forestall the enforcement by the creditor – nation of the facility’s terms and conditions, especially where the facility is collateralized. No serious nation grants a loan without these terms,” noted legal practitioner, Kenneth Ikonne.

“The presence of these terms in those agreements with China does not in the least imply a cession of sovereignty to China. But what it does underscore is the need to borrow sparingly but strategically, and to spread the projects out equitably, since the successful enforcement of the contract’s terms might necessitate a seizure of a strategic national asset, and thus affect every part of Nigeria without discrimination.”

Amaechi, the transport minister who has been in the middle of the controversy, and who has been particularly vilified for the loans, has also been making efforts to clarify the issues in this regard.

“It is simple,” he told journalists in Abuja last week. “China will give you loans, like the loan for the rail from Ibadan to Kano which is $5.3billion. Not that you are ceding your sovereignty, you can’t take away the sovereignty of Nigeria. The implication is that if at the end of the day you don’t pay us our money, whatever we need to take from you, we take without you telling me about your sovereignty.

“But most times, what the Chinese do is that they go after the same assets that they have constructed to be able to recover their money. So, what’s wrong with that? You are asking for $5.3 billion and they say, just wave your sovereignty, don’t tell me if I want to take assets, you tell me you are a government in Nigeria so don’t take it. Then how do I recover my money? If the national assembly thinks that is wrong, they should tell us how to get the money.”

The Minister who subsequently appeared on AIT on Friday, further made his points clear, noting, too, that the $500 million loan which is the subject of House probe, was borrowed by the government of President Goodluck Jonathan, but is already being repaid, even as he reinforced his warning that the alarm may only serve to force China to withdraw from giving the country loans.

“There are are several inaccuracies. It is a trade agreement between Nigeria and China. The first issue is that the ministry of transport doesn’t take loans. I have said it here, that anything about loans, talk to ministry of finance. So, I couldn’t have signed any loan. What I signed is called commercial contract, that is contract between the federal government and the CCECC (China Civil Engineering Construction Corporation) as a contractor,” he said.

“But the contract between Nigeria and China is usually signed by the ministry of finance. But whether it is ministry of finance that signed it or ministry of transport, the issues remain the same. And the issue is that nobody is signing away the sovereignty of the country. What you do is that you give a sovereign guarantee, the so called sovereign clause. I’m ashamed at those interpreting this the other way.

“What it means is that if tomorrow we are not able to pay you, and you have come to collect the items that we have agreed upon that I am putting up as guarantee, I can’t say No, you can’t touch it because I’m a sovereign country. They are saying that if you are not able to pay, don’t stop us from taking back those items that we want to take to recover our funds. It is a standard practice, whether it is China, Britain, United States, any country, because they want to know they can recover their money. What the clause does is to say to, I expect you to pay according to these terms that we have agreed. If you don’t pay, don’t wave your immunity on me when I come to collect the guarantee you put forward. That’s all.

“We are paying, the $500 million they are talking about, we have paid back $96 million. It’s just that they like to politicize a lot of of issues. The $500 million was taken by President Goodluck Jonathan during his term. The 2018 agreement is the Lagos-Ibadan rail. But there is an agreement for Kaduna-Abuja which was signed before we came. We signed the Lagos-Ibadan, we want to sign Ibadan to Kano. We have also applied for them to give us a loan for Port Harcourt to Maiduguri, which entails that if the loan is approved, we construct the rail from Port Harcourt to Aba, Aba to Owerri, to Umuahia to Enugu; Enugu to Makurdi, Makurdi to Lafia, Lafia to Jos, Jos to Bauchi, to Gombe and then to Damaturu. And what we are simply saying is that if you are fighting these people, and I’m getting feedback from the Chinese ambassador to Nigeria that they are beginning to find it difficult to push the loans because the Chinese government is worried about what the national assembly is doing. It is not as if Nigeria doesn’t have the capacity to pay back. We will pay back, 20 years at 2.8 percent, which country would give you that loan?

“Again, we told them that these loans are not given to us, it is paid directly to the contractors, once we sign that these jobs have been done, they pay the contractor. What is important is that the projects are in place.”

Apprehension, politics over real facts?

The transport minister suggested in his submission that part of the controversy is fuelled by politics. This may be incorrect. Nigerians appear, given the prevailing debt challenges, to be genuinely concerned, if not apprehensive about the country’s future, and are taking on anyone who appears to be playing the fears down.

In an attempt to clarify some of the issues last week, ex banker and CEO of BIC Consultancy Services, Dr Boniface Chizea, noted that the fear of losing sovereignty to China is rather alarmist as according to him, it is inconceivable that a country’s sovereignty would be signed away by the stroke of the pen.

“Their is this alarmist cry that there are clauses in the loan agreement which would be tantamount to the selling of the sovereignty of Nigeria to China! In the first place that in my humble opinion is wrong choice of words,” he had said.

“Literally speaking you cannot sign off the sovereignty of any country. It is not a chattel that you can transfer ownership based on some agreements. All who go to China to ask for loans must be familiar with their terms by now. They don’t vary in any material details. The terms are as constant as the Northern Star!,” he said.

Dr. Chizea also argued that Chinese loans often come with soft conditions, even as they are usually borrower friendly, even as he agreed that Amaechi is right about his position on the House probe being likely to scare China aware.
“The loans conditions are soft. The repayment period is long. The interest rates are borrower friendly always low single digit and there is often attached long moratorium before repayment kicks in.

“But the Chinese will handle the construction using top of the class technology. They will not allow you to handle any aspects of the project. There citizens will work on the project and they will handle literally all input. And that for them is value adding. It is left for the borrower to ensure that the assumptions and terms are not weighted against him. But if you default and it could not be remedied, the Chinese takes over and runs the business on commercial terms to recover their money or for that matter takeover and have ownership permanently transferred,” he said.

“But it is not conceivable that the project will be relocated. And therefore the benefits still accrues to your environment. Is that now what is being referred to as selling off our sovereignty? But Loan agreements are of a technical nature and not something that our legislators should overly dabble into. We must give the benefit of doubt to our experts to act in our best interests. And whenever they don’t as a deterrent their must be consequences.
“But Rotimi Amechi is right. This loan is sovereign and if the Chinese see gathering resistance, they could be a change of mind. And that could be disruptive! We are in agreement therefore with the Minister that the decibel should be lowered not to throw spanner in the works. Let’s allow our experts handle and conclude negotiations. There will be plenty of time for over sight responsibility.”

However, not many took kindly to his position. He was, according to him, accused of being an apologist of the government, which prompted his subsequent rejoinder.

“I hesitated to issue this rejoinder and was going to let matters slide. He who fights and runs away they say lives to fight another day. I have never received such negative reactions as I did on the post on the China loan,” he said in a rejoinder to his original remarks sent to Business Hallmark last week.

“What I did not like was the attempt to project me as a government apologist; I am not! I am just a matured, concerned, patriotic Nigerian who simply wants to call a spade by its name and wants the best for Nigeria. I also believe that sometimes government could be up to something good and therefore not a narcissist. And also of the mindset that governance is not a walk in the park particularly in the Nigerian situation where trust in those in government is at a discount.

“Not being a rabble rouser by any stretch of the imagination, I am prepared to give credit where and when it is due. But the extent of bile; negative sentiments about the China loan is mind boggling. Loan agreement cannot be the subject of a referendum. When all Nigerians would want to vet the loan agreement to ensure that the sovereignty of the country is not being mortgaged. It is reminiscent of the IMF debate of the mid 1980s. When in an attempt to pander to popular negative sentiments about the IMF, the country swallowed the conditionalities but inexplicably refused to draw down the loan for fear of compromising the country’s sovereignty ala popular sentiments.

“And I don’t think the country ever recovered from what in my opinion was a mis step. Those elected into positions of responsibility must be allowed to prove their mettle failing which there must be consequences at the polls. But one is not seeing much of that today. This is another reason why we need to clean up our electoral process to ensure that those elected are accountable. Loan advisedly accepted on itself should not be bad for a recipient except that in the Nigeria situation we have reached a position of being over leveraged. And there is the challenge of fiscal sustainability and therefore debt overhang.

“There are countries that would wish to borrow but no one is prepared to lend to them. I did not also appreciate, as it is being canvassed, that for sovereign debts that if you default that revenue accruing from any source could be attached to make good the indebtedness. I can understand in a situation of judgement debt were the courts give such authorisation like the P&ID debacle currently still unravelling before our eyes. Otherwise, if a country borrows to fund the provision of train services for instance; should it default the investment is reposesed and repayment is expected as the lender takes over the asset to sweat it. That is my understanding of standard loan procedure, loan must not be accepted otherwise.

“There is so much doubt about the bona fides of the Chinese as lenders with integrity. There is suspicion of a hidden agenda on the part of the Chinese. I still believe that with sincerity of purpose that the Chinese loan could be made to be a win win proposition. The rail line development is work in progress and I am wary of disruptions. No one by now should be deaf to the raging and on-going outcry and no doubt that caution will now be the watch word going forward. I have now had my say on this matter. But as the tendency to rabble rouse gains credence, we must all do ourselves the favour of asking; if not the Chinese loan where else to borrow to jumpstart yawning gaps in infrastructure in our beloved country, NIGERIA?” he wondered.

In the meantime, the House has said Mr. Amaechi as well as the Minister of Communication, Ali Isa Pantani; Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed; and Director General of the Debt Management Office, Ms Patience Oniha should return to the committee on August 17 to give details of the contract agreements.

The ministers are expected to provide answers on the $500m loan to be sourced from the Export-Import Bank of China for railway lines in the country.
They are also to provide details on the agreement signed between the Federal Ministry of Transport and the China Civil Engineering Construction Corporation 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.

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