How Much Does Nigeria Owe China?

How Much Does Nigeria Owe China?

…DMO, Presidency, National Assembly Churn out Different Figures, Stoking Scepticism …We’ve Effectively Utilised the Loans for Infrastructure…Lai Mohammed …Loans Not Necessary If We Halt Looting of Our Public Institutions…SAN Resolving the riddle of Nigeria’s debt to China, may get enmeshed in the country’s familiar matrix of sociology of figures. In other climes, two plus two

…DMO, Presidency, National Assembly Churn out Different Figures, Stoking Scepticism

…We’ve Effectively Utilised the Loans for Infrastructure…Lai Mohammed

…Loans Not Necessary If We Halt Looting of Our Public Institutions…SAN

Resolving the riddle of Nigeria’s debt to China, may get enmeshed in the country’s familiar matrix of sociology of figures. In other climes, two plus two is simply four but here, the answer could be lurking in the wind. It appears easier reaching for a pin in a haystack than trying to know the actual debt owed to China by Nigeria which now seems to be caught in some brick wall.

Either from the National Assembly, Presidency, Debt Management Office (DMO) or by other government officials, the public space is regaled with different figures that leave the citizenry virtually confused like every enquiry into statistics of other facets of our life.

The administration of President Muhammadu Buhari, which is pursuing a massive rail revitalisation projects, across the country with Chinese loans and prides itself as “borrowing only for infrastructure,” is also a bit edgy and opaque on the issue, reinforcing growing scepticism.

DMO & Presidency

Two weeks ago, the DMO in a statement jointly signed with the Presidency, explained that total borrowing from China as at March 21, 2020 amounted to $3.1 billion. This they claim represents a paltry 3.9 per cent of the country’s total debt put at $79.3 billion. However, checks indicate that the debts owed to China were grossly understated.

 “As at March 31, 2020, the Total Borrowing by Nigeria from China was USD3.121 billion. This amount represents only 3.94% of Nigeria’s Total Public Debt of USD79.303 billion as at March 31, 2020. Similarly, in terms of external sources of funds, Loans from China accounted for 11.28% of the External Debt Stock of USD27.67 billion at the same date. These data, show that China is not a major source of funding for the Nigerian Government,” the statement says.

Giving further insight on the terms of the loans from China, they reveal that, “The Total Borrowing from China of USD3.121 billion as at March 31, 2020, are concessional Loans with Interest Rates of 2.50% p.a., Tenor of Twenty (20) years and Grace Period (Moratorium) of Seven (7) years.

“These Terms are compliant with the provisions of Section 41 (1a) of the Fiscal Responsibility Act, 2007. In addition, the low interest rate reduces the Interest Cost to Government while the long tenor enables the repayment of the principal sum of the Loans over many years. These two benefits make the provisions for Debt Service in the Annual Budget lower than they would otherwise have been if the Loans were on commercial terms.

Infrastructure Loans

Explaining reasons for the loans, the government says, “The USD3.121 billion Loans are project-tied Loans. The projects, (eleven – 11 in number as at March 31, 2020), include: Nigerian Railway Modernization Project (Idu-Kaduna section), Abuja Light Rail Project, Nigerian Four Airport Terminals Expansion Project 2 (Abuja, Kano, Lagos and Port Harcourt), Nigerian Railway Modernization Project (Lagos-Ibadan section) and Rehabilitation and Upgrading of Abuja – Keffi- Makurdi Road Project.

“The impact of these Loans is not only evident but visible. For instance, the Idu – Kaduna Rail Line has become a major source of transportation between Abuja and Kaduna. Also, the new International Airport in Abuja, has improved air transportation for the populace, while the Lagos – Ibadan rail line when completed, will ease traffic on the busy Lagos -Ibadan Expressway.

“The projects also have the added benefits of job creation, not only by themselves but through direct and indirect service providers, a number of which are Small and Medium Enterprises. It is widely accepted that investment in infrastructure is one of the most effective tools for countries to achieve economic growth and development. Using Loans from China to finance infrastructure is thus in alignment with this position”.

Arguing that the loans are in line with the “External and Domestic Borrowing Guidelines for Federal Government, State Government and the Federal Capital Territory and their Agencies,” the statement adds that, “The principal process and requirements for borrowing by the Government are expressly stated in the Debt Management Office Establishment (ETC) Act, 2003 (DMO Act) and the Fiscal Responsibility Act, 2007. Section 21 (1) of the DMO Act,

“No External loan shall be approved or obtained by the Minister unless its terms and conditions shall have been laid before the National Assembly and approved by its resolution” and Section 41 (1a) of the FRA,

“Government at all tiers shall only borrow for capital expenditure and human development, provided that, such borrowing shall be on concessional terms with low interest rate and with a reasonable long amortization period subject to the approval of the appropriate legislative body where necessary.

“To summarise, the Federal Ministry of Finance, Budget and National Planning works with the MDAs under whose portfolio a proposed loan falls and also with the DMO. Thereafter, the approval of the Federal Executive Council (FEC) is sought. It is only after the approval by FEC that His Excellency (The President) requests for the approval of the National Assembly (NASS) as required by Section 41 of the Fiscal Responsibility Act, 2007.

“More importantly, it is only after the approval of NASS that the Loans are taken and Nigeria begins to drawdown on the Loans. In summary, Borrowing is a joint activity between the Executive (FEC) and the Legislative (NASS) Arms of Government.

“The Loan Agreements are reviewed by legal officers of the Federal Ministry of Justice and the Legal Opinion of the Honourable Attorney General of the Federation and Minister of Justice is obtained before any External Loan Agreement is signed,” the statement maintained.

On whether China can take possession of the projects financed by them if Nigeria defaults in the servicing the loan, the statement says, “Firstly, Nigeria explicitly provides for Debt Service on its External and Domestic Debt in its Annual Budgets. In effect, this means that Debt Service is recognised and payment is planned for. In addition, a number of the projects being (and to be) financed by the Loans are either revenue generating or have the potential to generate revenue.”

Railway Extension to Abuja

It’s curious why such an exhaustive statement was silent on the whooping $3.9 billion (N1.4 Trillion) contract signed in October 2019 to extend the Itakpe-Ajaokuta-Warri railway to Abuja, the Federal Capital Territory with a 50 kilometer link to Lokoja.

The contract for the new 302.6 kilometer Abuja-Itakpe-Lokoja rail line was awarded to China Railway Construction Corporation (CRCC) under a public-private partnership. Expected to pass through Baro, which now has an inland port, the rail line will also link Lokoja, the Kogi State capital. As part of the agreement, the Chinese firm will also construct the Warri deep seaport.

Minister of Transport, Mr Rotimi Amaechi stated that Nigeria will contribute 15% of the project cost, CRCC will invest 10% while CRCC will borrow the remaining 75% from Special Purpose Vehicle (SPV). The company will also be responsible for managing the rail network until the loan is repaid, after which the project will be handed over to the federal government.

“We will give them sovereign guarantee and they will give us performance bond that protects our sovereign guarantee. When they finish construction, they will manage for 30 years,” he explained.  

Apart from the foggy nature of the country’s actual debt to China, the details had thrown the country into some frenzy. In the wake of the public sitting by the House of Representatives Committee on Treaties, Protocols and Agreements led by Hon Ossai Nicholas Ossai, tongues were wagging on whether our public officials have not battered away the country’s sovereignty in the anxiety to secure the basket of loans  

Controversial Clause

The House of Representatives, which claims it is evaluating $33 billion contract loans, had raised the alarm over clauses in Article 8(1) of the commercial loan agreement signed between Nigeria and Export-Import Bank of China, which allegedly concedes sovereignty of Nigeria to China in the $400 million loan for the Nigeria National Information and Communication Technology (ICT) Infrastructure Backbone Phase II Project, signed in 2018. This loan was never mentioned in the statement released by the DMO and the Presidency.

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.”

Amaechi’s Fears

Amaechi fears this inquiry by the House of Representatives may stir the hornet’s nest and imperil the $5.3 billion loan expected to underwrite the cost of building the 2,576 kilometer Ibadan-Kano standard guage railway expansion. He says it may also jeopardise the $11.1 billion loan for the proposed 1,400 kilometer Lagos-Calabar coastal railway to be built by the Russians and the $3.5 billion loan for the construction of the 2,000 kilometer Port Harcourt-Enugu-Maiduguri standard guage railway.

“If you are telling the man who lent you money you don’t like the way he lent you, he won’t lend you any further.

“For this one (Lagos-Ibadan rail project), we have $1.6bn for which we are contributing about $200 and $300 million. But don’t forget, they have not finished paying, they can stop at any time,” he warns.

Postponing NASS Probe

While responding to the lawmakers, Amaechi asked that the probe be postponed until December after the loan must have been received. However, the House Committee made it clear that it can conduct probes/reviews on Nigeria’s bilateral loan any time.

“The investigation being carried out by National Assembly may frustrate the loan agreement between us and China on the Port Harcourt to Maiduguri rail project.

“So, if tomorrow we are unable to construct Port Harcourt to Maiduguri railway because we didn’t get the loan, it is because of the investigation by NASS.

“I told the National Assembly that they can investigate but they should allow us get the loan first. “If they stop the work from Ibadan to Kano, it is because of the investigations, same with Lagos to Calabar railway.

“If you think there is corruption, investigate corruption. What we are saying is that we should conclude negotiation first because there is pressure affecting the Chinese government in which they are talking to us directly.  So, for me, what is primary here should be national interest.

“We have the approval to construct the Lagos-Ibadan, Lagos-Kano and Lagos-Calabar rail lines; we are also at the point of negotiating for the loans. “Summoning us to the National Assembly to come and address the loans would look like the government is no longer interested in the loan,” Amaechi said.

Hot Exchange with Committee Chairman

Ossai who claimed that most of the commercial contracts agreements lacked local content clauses, said it was unfortunate that the deals were sealed by non-designated and un-authorised officials.

His claim irked Amaechi who insisted that there was no iota of truth in the allegation that his ministry obtained $33 billion for the construction of railway projects.

The Minister, who had a hot exchange of words with Ossai, disclosed that his ministry had so far obtained $1.6 billion loan for the construction of the Lagos -Ibadan railway project.

Amaechi also faulted the notion held in certain quarters that the local content laws were breached by his ministry.

 “Mr. Chairman, I have the right to speak, you invited me, I was once a member of the House. If you say Ministry of Transport has a contract of $33 billion, we want to see it because as the Minister of Transport, the only contract awarded so far is that of $1.6 billion for Lagos-Ibadan which is under threat.

“The implication of having a contract of $33 billion is that I will have a large number of workers. There’s no $33 billion contract in the Ministry of Transport. What we have is $1.6 billion contract awarded under President Muhammadu Buhari and $800 million contract awarded by former President Goodluck Jonathan.

“By the time we came, the contract awarded by Jonathan, signed by Aganga, had been completed up to 80 per cent, so we didn’t have to do the meeting of local content. The only one that has to deal with the issue of local content is the $1.6 billion contract that was awarded for Lagos to Ibadan for which the Chinese government is providing $1.2 billion and we’re providing the remaining $400 million.

“There are over 20,000 workers, and only 560 of them are Chinese, we need to begin to say the truth. It’s good to tell Nigerians the truth, this is very political and we will show all the contracts awarded by the Peoples Democratic Party (PDP) government,” Amaechi countered.

Borrowed Funds Properly Utilised

Also thumping up government’s position on the issue, Minister of Information and Culture, Mr Lai Mohammed, says Nigeria is effectively utilizing the funds it borrowed from China and elsewhere for infrastructural development to create jobs and provide the basis for economic development.

The Minister stated this at the construction site of the Ibadan Train Station on Saturday, after a joint inspection of the Lagos-Ibadan Standard Gauge Rail Project with his Transportation Counterpart, Mr. Amaechi.

“There is no better way to answer Nigerians as to what we have done with the money we have borrowed than this trip,” he told the over 40 journalists who accompanied them on the inspection.

”On this trip, you have seen firsthand the stations being constructed, the rail lines and the people who are working on the projects.

“Rather than arguing with critics, we opted to allow you (journalists) – the ears and eyes of Nigerians – to come and see for yourselves what we are doing with the money we are borrowing,” he said.

Mr Mohammed said there is nothing bad in borrowing, provided the funds are invested in infrastructure rather than services or consumption.

“We didn’t borrow money for services or overhead expenditure. We borrowed money for capital projects: rail; roads; bridges; power – infrastructure generally,” he said.

The Minister said the tour of the Lagos-Ibadan Standard Gauge Rail Project is the first in a series of inspection the administration is embarking upon to showcase to Nigerians the status of work on the projects the government is executing with the money it has borrowed.

He expressed delight at the level of work on the train stations and the modern coaches procured to convey passengers and goods on the Lagos-Ibadan Standard Gauge rail line.

But miffed by how the country had become ridden, a Senior Advocate of Nigeria, Mr Adeyinka Olumide-Fusika in an interview with The Guardian,  says, “I have learned in my short time practicing law not to comment on things I’m not involved in. Although I am involved as a Nigerian because it is about legal agreement, I don’t want to get emotional in my response. I cannot give an opinion on a document I have not seen. It may be correct the way those lawyers see it.

Handing Over Nigeria

“I heard the Minister, Chibuike Amaechi and other people trying to rationalise it. But for China to take over Nigeria, are they coming with arms or we are going to handover ourselves to them and become their colony? It is unlikely. But in practical reality, you don’t need to physically take over and be the one running the country.

“If you give me a loan to buy a phone and I’m using it for business, the terms of the loan may be that if I default, the phone becomes yours. It is mine but in practical reality, it belongs to you. If they take over our railway assets in practical terms such that they are now owned by China, what does that mean? It means that a part of us is owned by China.

“Those taking loans for 20 years tenure cannot predict what Nigeria would be in 20 years, whether we would be able to pay back or not. So Amaechi cannot assume that we will pay back when we are very good in embezzling money. It is more reasonable to assume that we will not be able to pay back.

Looting Bazaar

“You heard the story of building a fence in the University of Maiduguri for N64 billion or that of the National Assembly renovation. You see what is going on in Niger Delta Development Commission (NDDC). That is even small compared to what you will see if we investigate Tertiary Education Trust Fund (TETfund), Nigerian Ports Authority (NPA), Central Bank of Nigeria (CBN) and the Nigerian National Petroleum Corporation (NNPC). Nigerians will die of shock if they know what is going on in those institutions.

“The argument that we are planning to default does not lie in the mouth of the Minister. It is more reasonable to admit that we will default and what are we taking the loans for, in the first place? Saying that Nigeria could not develop if we don’t borrow—coming from somebody of the caliber of a Minister is shocking. If they stop stealing, we need not borrow. Money flows around the country to harvest.

“There are no effective checks on how we spend public funds. If there were, how can you just wake up and say you want to build a fence for N64 billion? If you invest that money in teaching and human resources of that university, do you know the impact it would make?” Olumide-Fusika contends.

Photo: Minister of Finance, Budget and National Planning, Mrs Zainab Shamsuna Ahmed

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