THE CONCLAVE Editorial: X-raying Nigeria’s Chinese loan “quandary”

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Africa’s current fixation with the nimble Asian giant China probably stems from the US decision to take its foot off the gas-pedal of warm economic relationship with the continent. But seeing that most indices identify Africa as being the planet’s next frontier of prosperity, it is difficult to conceive the idea that the US will dawdle while China takes the cake.

Many African countries, including Nigeria, given a choice, will prefer to do business with the US – the devil they know. But the superpower’s penchant for dictating where the shoe is pinching the foot’s owner remains an irksome hurdle.

The foregoing scenarios provide critical context, vis-à-vis the recent uproar in the Federal House of Representatives during apublic hearing late July, when the Minister of Transport, Rotimi Amaechi, faced the House Committee on Treaties, Protocols, and Agreements. Amaechi had argued that a probe into Nigeria’s resort to Chinese loans to finance railway projects could make China, the lender, withdraw the loan offer of $500 million.

Concerns scaled up over the rising trend of government officials signing loan agreements with a clause that allegedly waives the sovereign immunity of Nigeria if she defaults in its repayment plan.

Not surprisingly, the controversy spawned several posers. If the lender (China) did not want the terms of the loan scrutinised by the borrower’s parliament (Nigeria), especially with allegations of the insertion of ‘loss of sovereignty clauses’, was the whole deal not distrustful?

Although Amaechi has attempted some positional summersault from his initial statement, the public hearing has sparked high-octane debates on what is being perceived as China’s strategic scheme to take over Africa, one country at a time.

Opponents of China’s increased inroad into Africa readily point to Zambia as a good example of China’s dodgy vision of capturing Africa through the debt trap. China is the main investor in Zambia whose debt stock was $8.7 billion at the end of 2017, out of which the country had borrowed at least $6.4 billion from Chinese lenders.

China’s influence on Zambia is so manifest that 22 months ago, Zambia deported the influential pan-Africanist, Professor PLO Lumumba, before he could deliver his anti-China lecture titled, “Africa in the age of China’s Global Influence and Global Geodynamics.”

Reacting to public trepidation over Chinese loans, the Debt Management Office (DMO) revealed that, as of March 31, total borrowing by Nigeria from China was $3.121 billion (at an interest rate of 2.5 percent with a tenure of 20 years and a grace period of seven years) representing 3.94% of the country’s total public debt of $79.303 billion. That is 11.28 percent of Nigeria’s external debt stock of $27.67 billion.

It can hardly be denied that China craves to be the number one influencer in Africa and the US clearly is not amused by that prospect. Many independent-minded Africans who are not interested in exchanging one colonialist with another are equally not amused but would rather encourage a win-win partnership where African countries are not reduced to tenants in their fatherland.

As this debate scales up, Prof. Bolaji Akinyemi, has correctly advocated that what should guide Africa and Nigeria’s choice is national interest rather than ideological affiliation. THE CONCLAVE concurs with this informed position.

Akinyemi, further clarified that Nigeria and other African countries cannot plead sovereign immunity when they are sued for defaulting in loan repayment, saying that the special clauses in these agreements are standard procedures.

It’s worth noting here that the US has its own complications. Her share of global debt is 31% as compared to China’s 9.8%. US debt per capita is $80,000 or 149% of GDP while China’s is $1,326 or 15% of GDP. While the US maintains many military bases all over the world at great cost in furtherance of its gunboat diplomacy and self-appointed role as global policeman, China concentrates on its sphere of influence and avoids unnecessary wars.

In the last 40 years, China has not fought any major war apart from skirmishes and show of force while US military escapades and interventions in many parts of the world are well known. According to a report published in CNBC, America has spent $6.4 trillion on wars in the Middle East and Asia since 2001.

Meanwhile, China and its state subsidiaries have lent about $1.5 trillion in direct loans and trade credits to more than 150 countries around the world. This makes China the world’s largest official lender – outstripping the World Bank, the IMF, or all OECD creditor governments combined.

Naturally, the US should be worried about these and so also should Nigeria and Africa. THE CONCLAVE believes that the country should exercise utmost circumspection when engaging an intrinsically secretive lender, even when his terms appear more attractive in the short run.

More specifically, according to the House, Article 8(1) of the commercial loan agreement signed between Nigeria and Export-Import Bank of China concedes Nigeria’s sovereignty to China. The legislators 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 leery 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.”

While Amaechi and the concerned ministers are to have their day with the House on August 17, 2020, to explain their action, some critics, including former vice president, Alhaji Atiku Abubakar, agreed with the federal legislators at the weekend that the clause was capable of mortgaging the sovereignty of Nigeria, saying it exposed Nigeria to the fate of Zambia, which signed a loan agreement with a similar clause with China and has now lost some of its national assets to the Asian country on default of repayment.

The waiver clause, THE CONCLAVE believes, might have been accepted by the Nigerian officials out of ignorance of the concept of the sovereign immunity of states, which protects sovereign states from the jurisdiction of courts, particularly in a foreign country without the consent of the state.

It is this concept that Nigeria is hanging on to in its $9.6bn arbitral award case with Process and Industrial Development (P&ID) in the United States, where the nation is challenging the enforcement of the award on the grounds of sovereign immunity.

THE CONCLAVE believes that there is nothing wrong in Africa and Nigeria broadening the basis of its interaction with the economic global community. Clearly, this is better than just being dependent on one source.

But we must sound a note of caution here: the country must always enlist experts to interpret the terms of her agreements to ensure they will not lead the nation into a loan quandary and economic slavery to boot.

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