The unending controversy over the $500 million Chinese loan to Nigeria, for financing part of its rail projects, is understandable. It is interesting that the loan is currently being investigated by the House of Representatives. Nigerians are reportedly concerned about a clause in the loan agreement which allegedly waived Nigeria’s sovereignty to China should Nigeria default in the repayment of the loan. Article 8(1) of the commercial loan agreement between Nigeria and the Export-Import Bank of China has reportedly conceded Nigeria’s sovereignty to China.
Specifically, the contentious clause in the agreement signed by Nigeria and the Export-Import Bank of China 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.”
The Attorney-General of the Federation and Minister of Justice, Abubakar Malami, has categorically stated that Nigeria would not sign off its sovereignty for any loan. In the same vein, the Minister of Transportation, Chibuike Amaechi, has also made some clarifications about the loan and asked the National Assembly to halt further probe so as not to force China to cancel the loan and other agreements with Nigeria. However, we call for proper accountability of the Chinese loan and other foreign loans taken by the government as well as new ones. It is in our overall national interest to do so. Nothing should stop or impede the ongoing investigations on the loan.
No doubt, the Chinese loan requires proper scrutiny. The government should worry about the opaque nature of Chinese loans, especially when the agreement for such loan is written in Mandarin language. It is also worrisome that the Federal Government has borrowed so much money from China in recent times. There are strong indications that Nigeria may likely fall into the same Chinese debt-trap suffered recently by some African countries. African countries highly exposed to Chinese loans include Angola, Ethiopia, Kenya, Republic of Congo, Sudan, Zambia, Cameroon, Nigeria, Ghana and DR Congo. According to the Debt Management Office (DMO), total value of Chinese loan as at March 2020 stood at $3.12billion.
Also, the House 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. In the last one year, President Buhari made request for $29.96 billion loan from bilateral creditors, including China. And in March 5, 2020, the Senate approved $22.7 bbillion loan request, which was criticised by the opposition 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. There is need for the loans to be properly utilised to avoid the looming debt crisis.
It is worrisome that loans taken by Nigeria could raise our debt servicing to N3trillion yearly. This is unacceptable in view of our declining revenue. The nation’s debt stock had risen from N12.6trillion in 2015 when the present government took over to N27.40 trillion. Government should borrow when it is extremely necessary.
As at March 31, 2020, Chinese loans constituted about 3.94 per cent of Nigeria’s total public debt of $79.3billion, while external sources of funds, loans from China accounted for 11.28 per cent of the external debt profile of $27.62billion as at the end of March 2020. The Chinese loans attract 2.5 per cent interest, which will be paid over a 20-year period in addition to a moratorium of seven years. Although this looks attractive, the government can only borrow when it is inevitable.
It must be pointed out that Nigerians are entitled to the details of all loans taken by the government. Nothing about the loans should be shrouded in secrecy or be politicised. Although the Chinese Foreign Ministry has denied having any clause that cedes Nigeria’s sovereignty to China in the loan agreement, the Zambian experience with China readily comes to mind. China had in 2018 taken over Zambia’s National Broadcasting Corporation over loan default, and is currently planning to take control of its national electricity company and the Kenneth Kaunda International Airport, Lusaka, to meet its loan repayment promises to China. Nigeria must learn from the Zambian experience and reduce its over-dependence on Chinese loans. In all our loan agreements, the nation’s interest must override all others. This is why the National Assembly must scrutinise with utmost care all loan requests from the government before they are approved.