Halt loans agreements with China pending scrutiny of conditions
• Pacts Signed By Executive Should Be Subjected To NASS — Suraju
• Forensic Audit Of Chinese Loans Is Vital Now — Uba
• Amaechi Attempting To Intimidate Lawmakers — Uwazurike
• Transport Minister Allays Fears
With China’s glaring lack of tolerance for sleaze and vague financial transactions, not a few were riled by the Minister of Transportation, Rotimi Amaechi’s sensational claim that the Asian giant will not approve Nigeria’s request for loans if the National Assembly (NASS) continues its ongoing probe.
Despite China being one of the world’s most regulated economies, Amaechi, at an investigative hearing of the House of Representatives Committee on Treaties and Protocols, last week, asked the lawmakers to halt the probe of the $500m loan from the Chinese government to finance some rail projects across the country.
He alleged that some sections of the country’s rail lines “will suffer” if China stops giving out loans to Nigeria upon sensing a disagreement between the executive and the legislature.
Irked by Amaechi’s call, stakeholders are not only calling on the NASS to stop all further agreements and contracts with China pending the scrutiny of all conditions and clauses inserted in them, they are also categorical that in other climes, loans of certain magnitude are subjected to public scrutiny, especially when they have the tendency to violate the territorial integrity and sovereignty of the receiving nation.
Furthermore, they stressed that since China had in the past been accused of allegedly applying fraudulent, irregular and underhand pressures in the structure of its loan agreements with countries, government officials like Amaechi should desist from intimidating the legislature into abandoning its constitutional role of oversight.
But the Minister of Transportation has dismissed fears of Nigeria ceding its sovereignty to China under any guise, explaining that the Sovereign Guarantee clause in the loan agreement was to assure China that it can take over the asset constructed with the loan, should Nigeria default.
He said: “The terms contained in the agreement is not as if we are signing off the country’s sovereignty. What we do is that we give a sovereign guarantee, which is an immunity clause. The clause is that in case the country defaults, China will come to collect the items agreed upon.”He assured that the Chinese would not take over assets that were not constructed with the money, in case of default. And should the asset depreciate; then the country can discuss other assets they can take over to recoup the loans.
RECALLING how the international community had in the past accused China of applying some fraudulent, irregular and underhand pressures in the structure of their loans agreements with countries, a development expert, Dr. Chiwuike Uba, told The Guardian that: “Clauses that give the Chinese irrevocable powers to acquire and run projects funded through their loans, peradventure the country is unable to repay the loan, are fraudulently inserted in the agreements. This situation is made worse by the use of companies blacklisted by the World Bank for corruption by the Chinese government for infrastructure projects in Africa.
“Unfortunately, these agreements are usually not made public. In addition, due to our leaders’ weaknesses, agreement to pay the loans, and the craving to siphon/loot the loans for private purposes, they rarely take time to read/study the agreements before signing.”
He added that despite the claim of being averse to corrupt practices, Chinese government treat their loans strictly as “business and political instrument for control,” stressing that “Amaechi’s posture may be a ploy to stop the National Assembly from revealing the corruption involving Nigerian government in contracting some of the loans.
“The probe will reveal that Chinese loans are not entirely infrastructure finance-based as bandied by the government. The interest rates on Chinese loans are based on market terms, very close to private capital market rates, and these loans are backed by collateral. In most cases, the loans are not only secured with national assets, but with natural resources and revenues. In this case, Nigeria may have, as part of the repayment terms, agreed to be repaying the loans from concessional loans from the World Bank and the IMF,” he stressed.
Uba argued that it was erroneous to assume that the executive was accumulating debts without the National Assembly’s approval, stressing that the lawmakers have demonstrated a glaring lack of capacity to scrutinise the loans’ approval requests, or are uninterested in the short-term implications of their decisions.
He added: “For the avoidance of doubts, the constitution vests the National Assembly with the power to make laws with respect to any matter that concerns “borrowing of money within, or outside Nigeria for the purposes of the federation or of any state” and “public debt of the federation.” The power is reinforced by subsidiary legislations, such as the Debt Management Office (Establishment, etc.) Act, 2003; the Fiscal Responsibility Act 2007; the Investments and Securities Act, 2007, and the Central Bank of Nigeria Act 2007.
On why the fears raised by Amaechi should be discountenanced in the ongoing probe, he stated that Nigeria was already entrapped in debt and might lose its sovereignty, insisting that whatever was necessary should be done to save the country from possible collapse.
“Our failure to take the right steps in the management of our loans are the reasons for the fraudulent P&ID Gas Project and the emerging crisis in the Azura Power Project, where Nigeria risks paying $1.2b for a $237m loan collected by Azura from various banks. Currently, it is alleged that Nigeria pays $30m to Azura monthly, even if it doesn’t have the capacity to take power from the plant. These would not have happened if due diligence were done before the loan agreements were signed,” he stressed
Going forward, he added: “I would expect the National Assembly to tender an unreserved apology to the citizens for failing in its constitutional responsibility with respect to loan approvals. It is important for the National Assembly to review all previous loans agreements to determine if the loans are for the overall interest of the country. As part of the assessment criteria, the legislature should, in addition to reviewing the legal and foreign diplomacy implications, carry out a cost-benefit analysis of the projects for which the loans were taken to determine the costs (fiscal, economic and social costs) and benefits (fiscal, economic and social benefits) to Nigeria. In view of the inherent lack/inadequate capacity in-house, I would recommend that the National Assembly should hire experts to support their works.
He said there was no better time to embark on forensic audit of the Chinese loans obtained by the country so far than now, as according to him, “Amaechi’s statement is loaded with blackmail and whipping of sentiments designed to force the National Assembly to suspend the probe and most especially, in view of the discovery of the purported clause in the loan agreement that could impair the sovereignty of Nigeria.”
ACCORDING to the Executive Director, Human and Environmental Development Agenda (HEDA) Resources Centre, Olanrewaju Suraju, it was uncharitable, reckless, and indecorous for Amaechi to say that further scrutiny of $500m loan agreement could provoke the Chinese.
Suraju, a proponent of transparency, accountability, inclusion and responsiveness in governance, stated that in saner climes and normal considerations, loans and agreements should not be signed without an input from the National Assembly, which would scrutinise and ascertain the implications of such loan agreements on the country.
He insisted that with the latest revelation that Chinese loans have implication on the sovereignty of the country, both the current and future executive arms of government should not be allowed to sign any form of undertaking that would compromise the integrity, sovereignty and also the national heritage of the country under any grant and loan without the endorsement of the National Assembly.
“When I read about cases involving Zambia and some other Central and Eastern African countries, I feel such cannot happen here. But with this revelation about ceding of Nigeria’s sovereignty, I was flabbergasted to see that some of those things were surreptitiously included in some of the contracts or loan agreements between Nigeria and China. But Amaechi’s statement to the effect that the scrutiny will offend China means that some of these compromises were deliberately done and some of the government officials are ignorant of what their responsibilities as ministers, directors, bureaucrats are in scrutinising and signing those agreements,” said Suraju.
IN same vein, former Group Head, Global Financial Markets Group (in charge of Debt and Equity Capital Markets), Dr. Jekwu Ozoemene, stressed that across the world, governments subject to public scrutiny, such magnitude of loans, especially those that have the tendency to violate the territorial integrity and sovereignty of the nation.
Ozoemene, who has severally warned that the country was on a debt cliff, said it is difficult to fathom why clauses that surrender the country’s sovereignty would be in any loan agreement, noting that where such clauses exist, they constitute potential international embarrassment. He further explained that the reason the country has borrowed so much that it cannot repay was because people who should have known better are erroneously claiming that the country’s GDP to debt ratio is low, so the country has space to borrow.
Ozoemene said the government has been warned not to take the commercial aspect of the loan from China because such cannot be restructured in the event of an economic shock, whereas developmental loans from the IMF or World Bank can be restructured without penalty if a country is plunged into economic crisis.
“We have approached a debt cliff. I am saying that because I am juxtaposing what we are doing with what we did before the debt crisis of 1986. During our debt crisis of 1986, the trigger point was N19.6t and from then on, all we were doing has been servicing the debt until 2005 when we had our debt relief and cancellation,” he submitted.
Some stakeholders in the South East zone have asked the NASS to go ahead with the probe of Chinese loans, stressing that Amaechi’s call for its stoppage was out of place, and a pointer to imminent financial malfeasance.
ALSO baring his mind on the issue, a legal practitioner and emeritus President General of Aka Ikenga, Chief Goddy Uwazuruike, insisted that Amaechi was merely attempting to intimidate the legislature into abandoning its constitutional role of oversight, simply because the ongoing investigation has the capacity to unveil other heinous clauses in the agreements that allegedly mortgaged the sovereignty and future of the country and her citizens to the Chinese government and its corporations.
On why the probe must be concluded, Uwazuruike, who stated that Chinese loans to Nigeria have always been turnkeys, noted that accumulation of debts was an irresponsible action by any government, stressing that since loans are repayable by future governments, representatives of the people must be carried along all the way.
On whether a forensic audit of the loans obtained was necessary, Uwazuruike, who answered in the affirmative, however, added that the Federal Government would not support the exercise, stressing, “an inquiry into Chinese loans may even be tantamount to opposing the Muhammadu Buhari’s government.”
He stated that such inquiry might amount to nothing, going by the rot in different parastatals of government. Be that as it may, “we will continue to point out the nepotism and corruption in the system, but this government will continue to live dangerously because the three arms of government are firmly beholden to Buhari.”
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