Why Chinese loans must be scrutinised thoroughly – Mailafia
With some African countries already nursing badly burnt fingers arising from failed Chinese loans/deals, former Deputy Governor of the Central Bank of Nigeria (CBN), Dr. Obadiah Mailafia wants the Federal Government to tread carefully in order not to suffer similar fate. While also commenting on the size of loans so far collected, he stressed that the country should take cognisance of political risk associated with piling up such huge loans from one country that is also a world power, even as servicing challenges could lead to loss of critical national assets.
Mailafia notes that the bulk of Chinese loans are concessionary partly because China genuinely wishes to partner with Africa in development, investments, trade and international economic relations, but insists Nigeria has good reasons to worry about the loans, as some of the projects that they are tied to, are not based on the kind of rigorous project identification and preparation that the World Bank, the African Development Bank and other multilateral finance institutions with a formidable intellectual capital would undertake before reaching a financing decision.
Mailafia, who decries the practice of getting a loan from China to build a facility, import labour from there, and after project completion, maintenance and spare parts still have to come from China, says, “but let’s face it, the Chinese are in business. It is up to us to be tough negotiators and in striking deals that are positive-sum rather than negative-sum in terms of ultimate benefits and outcomes. We must also insist on technology transfer with the Chinese. People will always get away with what they can; it is up to us to protect our own interests and to make sure that we are not being recolonised by stealth… I would strongly advise that when we enter into such loan negotiations, we must ensure rigorous project preparation. For my part, I have always insisted that we take external loans only for projects that have a guaranteed calculated return on investments.”
The presidential candidate of the African Democratic Congress in the 2019 general elections, said even though China helps us develop projects that have economic value, “some of the projects lack the necessary linkages because Chinese are only now beginning to understand our continent, and do not always do enough technical preparatory studies in terms of project identification to ensure that projects are implemented flawlessly, and that there are dynamic integrated sectoral linkages that maximise value and return both in financial and socio-economic terms.”
On what Nigeria can learn from the Asian giant, Mailafia urges the country to emulate China by embarking on a modernisation programme that would be anchored on agrarian reforms, industrialisation, massive investment in human capital and infrastructural development.“The architect of the New China was a little philosopher-king by the name of Deng Xiaoping. When he took over in 1979, he launched a modernisation programme that was anchored on agrarian reform, industrialisation, massive investment in human capital and infrastructure development. Today, China has a GDP of US$14.2t and a per capita income of US$10,153. These are the figures in nominal terms. When you translate them into purchasing parity terms, China’s GDP is estimated to be US$27.331t, way ahead of America’s US$21.438t. Chinese themselves are wary of such comparisons. Their strategy is to rise quietly to the height of world economic and political power.”
He seeks dealing with grand corruption ruthlessly, stressing that sentencing looters to life-imprisonment would not be a bad idea.“We must also develop a strong and effective, merit-based civil service, pay attention to the recruitment, mentoring and appointment of leaders. We need an agrarian revolution that restores peace and productivity in the rural countryside. From there, we must link it to the manufacturing sector. We must launch an agriculture-based industrial revolution, based on local resources and local needs.
“We must also invest heavily in human capital, particularly in science, technology, engineering and mathematics – the so-called STEM disciplines. We must open the door to foreign investors by reinventing our country as a secure, stable and business-friendly environment. This also requires definitively fixing the power and infrastructures conundrum. We must learn how to borrow technology. We must borrow from everybody. We must imitate the best technology in the world through reverse engineering…
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