Ifeoma Ken-Okonkwo is an accomplished banker. She was a bank manager when I met her. I used to hear that banks are generous with the grant of loans to their employees. House loans, car loans, et cetera. When we became close and it appeared that our relationship may end up in “I do”, I asked her a question, “please are you owing any person?”, She answered with another question, “why do you ask?”. I told her I am not interested in what she has in her account because what she has in her account will not entitle anybody to come to our house uninvited and insist on breaking into our privacy but I am interested in who she is owing, because whoever she is owing can force his way into our house and insist he must be heard and disturb our peace and privacy. I reminded her that even God decreed that the borrower is a servant to the lender. In the olden days, that servant there meant slave. In Asia, the practice of taking children as slaves to pay the debts of their parents is still rife. China is an Asian country. In fairness to both of us, we got married and discovered that none of us was owing. This gave us the freedom to organise our priorities, without any interference from any third party and helped our success in marriage, despite numerous challenges. We grew at our own pace and cut our cloth according to our size.
There is no free launch even in Freetown. China had an agreement with Tanzania to build their seaport for $10b on loan. In exchange, China will rent the port for a century and Tanzania will not have a say on who else can come and invest in the port once it is operational. They told the Tanzanians that once they build the port, there should be no other port to be built all the way from Tanga to Mtwara South. Immediately Magufuli was elected President of Tanzania, he repudiated the contract and alleged that China presented exploitative and awkward terms in exchange for financing. Chinese financiers set tough conditions that can only be accepted by mad people, he concluded. About 15 African countries are already enmeshed in the Chinese debt trap with serious consequences to their economic and social freedoms. It is revealed that African leaders prefer Chinese loans to loans from Western countries because China is willing to give bribes to them to take the loans. It appears that China tackles corruption nationally but practises corruption internationally. It is not uncommon to see United States and other Western countries accuse China of theft of their intellectual properties. This simply means that the international character of China is questionable. It’s rather pathetic how China is re-colonizing Africa by appealing to the ignorance and selfish interests of the leaders.
Talking about character, Prof Uzoaga taught me Banking in Business Management, University of Nigeria, Nsukka. He tutored us on the factors of credit worthiness. They are five and include capital, capacity, collateral, conditions and character. Summarily, capital means the assets of the person, capacity is the earning power, collateral stands for the asset that was pledged as security for a loan, conditions signify the economic environment of the person and character reflects the integrity of the person. We were educated that the insufficiency of a factor can be ameliorated by the excess of another factor except one. A man who earns big monthly can be given a loan even if his assets are few. A man with adequate collateral can be given a loan even if he does not have any immediate earning power. However, he stressed that a man in possession of the excess of the first four factors but lacks character is not qualified for a loan because a man without character can have the money and yet refuse to pay.
Nigeria is a country that has the surplus of the first four factors but unfortunately lacks character. During the 80s and 90s, we were reputed to have borrowed about $5b with compound interest. Due to incessant defaulting on the loans, we eventually paid back about $39b and was still owing about $36b during Obasanjo’s regime. With the threat of repudiation of the questionable debt by the National Assembly, Obasanjo negotiated the paying of $12b as a condition for the forgiveness of about $18b by our creditors. We exited our foreign debt through that and the yoke of economic slavery was lifted off from our shoulders. In pure economic calculation, one would have argued that Obasanjo’s option wouldn’t have been the best option. If the $12b was invested then on repairing our refineries and building new ones, we would have stopped importing refined petroleum products, which is the greatest destroyer of our foreign exchange, and would have been the largest exporter of refined petroleum and petrochemical products across Africa and made us capable of paying off our debts speedily and revamping our economy. But there was no guarantee that if Obasanjo had taken this route, the money will not disappear like previous and present money invested in that sector. So Obasanjo did the right thing then by using our money to redeem us from economic slavery, since obviously, we do not have the commensurate character to redeem ourselves through pure sound economic route. Ajeokuta steel complex, which would have engineered our industrial revolution, was 98% complete when it was abandoned for no reason till today. We were swimming in oil money when the project was abandoned. What a character!
Today, the oil money is no longer flowing. We have a man of integrity at the helm of affairs as President, in the person of Buhari, who is desirous of leaving a legacy of security, great economy and a corrupt free society. The temptation, therefore, to borrow to fulfil these lofty aims, in the face of scarcity of funds, is high. To be clear, the mere fact that President Buhari is able to put his corruption czar, Ibrahim Magu, on trial and is urging his trial to be public, shows that this President has nothing to hide. He will always have my respect. No other President before him had the courage of doing the same even when they did not consider any of the former EFCC Chairmen worthy of re-appointment owing to some alleged corrupt practices and insubordination levelled against them. However, from the voices we are hearing from both the panel probing Magu and the National Assembly probe of some MDAs, it appears that the President may just be a lone voice crying in the wilderness.
Another disturbing feature of the loan is that it has a moratorium of about 7 years. The regime of a two-term President, is 8 years. This means that the borrowing government is not going to be the paying government. Buhari has the integrity to pay back without default because he has character and lives an ascetic life. Rt Hon Rotimi Amechi, the Minister of Transport said that the present government is paying some of the loans by the previous government without default. But we cannot vouch for the integrity of the next government and the next President. Democracy has not promised us good governance, it has only promised us the freedom to choose our leaders. If the next government defaults, that is one way to economic slavery, God forbid!
The next controversial thing is the issue of the waiver of sovereign immunity of the borrowing country. The clause provides in Article 8(1) of the commercial loan agreement between Nigeria and China 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 is a standard term in all international loan agreement and exists as customary international law. This means that whether, there is the waiver clause or not, you must pay your debt. As a student of International Law and Diplomacy, I was taught that countries, under the doctrine of pacta sunt servanda, are expected as gentlemen, to honour the agreements they freely enter into and it has been held in the Trendex case that countries cannot hide under sovereign immunity to evade debts which they incurred through commercial transactions.
If we had managed our resources very well, there would be no need for us to borrow today. But if we must borrow, we must be guided by certain strict principles. The first is that each government must restrict its borrowing to what it can pay within its tenure. Some economists will quickly point out that long term borrowing is better and cheaper than short term borrowing. This might be true where men have character. In Nigeria we lack character. A situation where a regime will be borrowing for another regime to pay should be discouraged because you are already mortgaging the future of the government to come. Amechi told us when he was a Governor that he borrowed money from some commercial banks for some Rivers State projects but the loans were structured in such a manner that he will finish the repayment before leaving office so as not to leave the burden of repayment to the future government. The National Assembly should borrow a leaf.
The next is that we cannot borrow our way out of our economic woes. Creativity and hard work are the basis for economic transformation. China was worse than us in the 70s. They refused to borrow but rather transformed their country into one of the largest manufacturing arenas in the world. If you shut your eyes to borrowing, your creative power comes alive. I recall as a young man, I refused to borrow and this triggered my creative power in movie acting that led me to act the first movie, Living in Bondage, that started Nollywood which is employing millions of youths today and is earning billions of dollars for Nigeria. If borrowing becomes your lifestyle, you will borrow until you are bankrupt. God forbid! Nigeria shall lend, it shall not borrow.
Every loan should be project based and each project should pay for itself. If an infrastructure becomes very important and we lack the resources, we can resort to the principle of build, operate and transfer. The lender should partner with the Government to build the infrastructure, operate it, recover his money and transfer the infrastructure back to the people after such recovery. The issue of granting subsidy on an infrastructure that was borrowed does not add up because higher price is better than slavery. Above all, we must learn to harness all our earning power in liquid and solid minerals, build our people in character and integrity. Punish corruption severely. In China, corruption attracts death penalty in some grave cases. If we must borrow their money, let us be bold enough to borrow their punishment for corruption.