A lot of dust has been raised over the nation’s growing loans from China. As of March 31, 2020, Chinese loans to Nigeria stood at $3.121 billion. This represents 11.28 per cent of Nigeria’s external debt of $27.67 billion. Nigeria Export-Import Bank (NEXIM Bank) alone accounts for 75 per cent of Nigeria’s $258billion bilateral loans, pushing the Paris Club members to the fringe of Nigeria’s debt market.
The fresh concern over Nigeria’s rising debt to China comes against a recent study that found that China, unarguably, the largest public lender to developing countries like Nigeria, imposes unique conditions on borrowing nations. This gives China tremendous influence over her debtors’ economic and foreign policies. According to Germany’s Kiel Institute for the World Economy (IFW), such terms can amplify the lender’s influence over the debtors’ policies.
Last year, we cautioned the Federal Government about Nigeria’s increasing loans from China to avoid mortgaging the nation’s sovereignty. The worry now is that more than 90 per cent of the reviewed Chinese contracts include a stringent clause that allows China to terminate the contract and demand repayment in the case of policy change in the borrowing country. The contract also refers to the borrower’s promises not to disclose details of the terms of the loans.
The reported secrecy may prevent other lenders from correctly assessing a country’s credit worthiness. Many Nigerians have expressed concerns that while the China debt increases, projects funded with the loans are facing cash-flow and viability problems. This has raised the question on Nigeria’s ability to fulfill its obligation to the lender (China). There are fears that Nigeria may not have the financial muscle to offset the debt, a development the National Assembly said last year was shrouded in secrecy. The Federal Government, however, has denied it.
Of particular concern is a purported provision in the loan agreement which was alleged to have waived off Nigeria’s sovereignty. The contentious clause is Article 8(1) of the commercial loan agreement between Nigeria and the Export-Import Bank of China, which the House of Representatives investigating the loans agreement has claimed conceded Nigeria’s sovereignty to China. This is a weighty allegation that requires proper scrutiny. The opaque nature of the loans, according to the lawmakers and labour unions, is against the principles of the Nigerian constitution
Also, the House of Representatives Committees on Treaties, Protocols and Agreements, as well as that of Local and External loans, had picked holes in the $400 million loan agreement for Nigeria National Information and Communication Technology (ICT) Infrastructure Backbone Phase II Project, signed in 2018. The contentious clause signed by the Federal Ministry of Finance, as the borrower, on behalf of Nigeria, and the Export-Import Bank of China (the lender), on September 5, 2018, was said to have provided that, “the borrower hereby irrevocably waives any immunity on the grounds of a 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.”
Although the Attorney General of the Federation and Minister of Justice, Abubakar Malami, had allayed fears over the Chinese loan agreement, doubts still exist over government’s position on the matter. Malami had explained that Nigeria would not sign off its sovereignty for any loan. The Minister of Transportation, Rotimi Amaechi, had last year asked the National Assembly to halt further probe into the loan so as not to force China to cancel the loans and other agreements with Nigeria. However, there is need for full disclosure of the Chinese loans, and other foreign loans already taken by Nigeria.
The fact is that, in the last two years alone, President Buhari had made request for $29.96billion loan from bilateral creditors, including from China. And in March 5, 2020, the Senate approved $22.7 billion loan request amid a rancorous session, especially from the main opposition party the Peoples Democratic Party (PDP) and other interest groups. Despite this, Nigeria is still borrowing and spending about 80 per cent of the budget on recurrent expenditure and overheads. The loans need to be properly accounted for and transparently utilised.
Experts have pointed out that loans taken by Nigeria from China and other countries could raise our debt servicing to N4trillion yearly. This is huge and unacceptable now that there are competing national priorities and declining revenues. The loans from China were reported to have been obtained with interest rates of 2.5 per cent, to be paid over a 20-year period in addition to a moratorium of seven years. Even as this condition looks generous and attractive on the surface, there is need to prioritise all loan agreements.