Why House of Representatives resolved to probe Chinese loans
A Peep into the mindset of House of Representatives’ member, Hon. Ben Rollands Igbakpa offers an insight as to why the lower legislative chamber resolved to beam it’s searchlights on the avalanche of Chinese loans to the country between 2000 to date.
While adopting the motion sponsored by Igbakpa at the plenary presided over by Speaker Femi Gbajabiamila last week, the lawmakers resolved to set up a high power investigative committee to probe the loan deals with a view to ascertaining their viability, regularise and possibly renegotiate them in the best interest of Nigerians.
Igbakpa (representing Ethiope East/West Federal Constituency of Delta State) said in a chat with reporters shortly after the motion was passed without any dissenting voice that there is more to the loans than meet the eye. The lawmaker argued that the gesture from the Chinese authorities could just be a gimmick to drag the country back to the dark days of debt burden that previous administrations had rescued the country.
According: “The world knows that China is laden with a lot of fraudulent activities. The struggle of the super powers is to take control of Africa and the developing world; they are all coming with one form of programme or the other.
“So as it is now, we have obtained a total of 17 loans from China and those loans are of various categories of projects. And we are going to service these loans till 2038 which is the maturity date for the last loans obtained in 2018.
“One will say China is not the highest creditor of Nigeria. Yes, but the worrisome part of it is that the way the Chinese bring these loans, there appears to be some under-the-table activities. The IMF has sounded it on their website that these Chinese loans are not Paris Club-compliant. It means that if there are disputes, there is no world-accredited body that will intervene. So, for me this is the kind of loan that we consider as black market loans.
“In all these 17 loans, the National Assembly does not know. We have committees for Treaties, Agreements and Protocols. They are not aware. We are dealing with international treaties, agreements that are bilateral whether trade or security, whatever it is.
“It is an international act that has to be domesticated back home. Loans are agreements and if we have such agreement and the committee does not know anything about them, they are in the dark; it shows that something sinister is being done and that’s why we are saying ‘let’s see.’
“In some parts of Africa today, the Chinese have already set up their own structure to take over some infrastructure they constructed for these countries that cannot pay: talk about Sri Lanka, Zimbabwe, Djibouti, Zambia, Namibia and Angola, even in South Africa. These loans are laden with lies and fraud that make them difficult for these countries to pay.
“Now in Nigeria, transportation and ICT, they have six projects each. How will you feel if one day, China comes and takes over, manage our rail system? In energy sector, they have three; in agric and water, they have two projects each. So, these Chinese loans are black market loans; they are one-chance loans.
“So we are saying now, let’s look at them. Whatever it is, let’s see it and find a way. Sometimes in 2013, they launched the Belt and Roads Initiative (BRI) to develop infrastructure for countries and extend their influence. And if you look at it, out of the 138 countries that signed off for the Chinese BRI programme, they are all developing countries.
“There is this saying that ‘any time you wake up is your morning’. And whether NASS has confronted the government before now, well, NASS has confronted them now. That’s our work. That is our responsibility to Nigerians. We are not indicting anybody. That is the truth.
“There is a lot of hues and cry out there and it is our role to expose corruption. It is our role to expose inefficiency and if there is any waste, we see it. There is this complaint that these projects are two expensive. They are overpriced and nobody is verifying. The Minister of Transport did say that so long as they are bringing the funds, they have 100 per cent right to execution.
“So, that means nobody is actually over-sighting them and that’s why we are saying let’s look at them and know the cost of the projects. What’s the expatriate quota, because they have about 64,500 Chinese people working under these loans? What is the time frame? When are they supposed to have completed the projects? What’s the position of the projects at the moment?
“We are taking the loans. Nigerians are not working. It is the same Chinese that will come and work here. So, what are we really gaining? If we can’t pay, I don’t know, they will take over the project and control part of Nigeria. I don’t really know.”
The Human rights writers association (HURIWA) has endorsed the probe initiative, and urged the lawmakers to ensure the conduct of a forensic audit on the issue. HURIWA’s national coordinator, Comrade Emmanuel Onwubiko, however, warned the lawmakers not to use the probe as a smokescreen exercise meant to serve as an alibi to negotiate some commission from the Chinese and Nigerian governments.
It noted: “If what the Federal House of Representatives wants to do is to scrutinise the loans and the documents signed by both parties that led to obtaining of those loans from China which are tied to some projects to be executed by Chinese firms, then the way to go about it is to engage the best forensic auditing experts and firms from anywhere in the world for a transparent process of recruitment, so these experts assist the House to unravel the facts and figures embedded in these loans’ documentations.
“The House must never take Nigerians for a ride as it had done on several occasions when it embarked on investigative activities of some agencies of government. Also what this intention to commence investigation means is that the National Assembly has self-indicted itself, because the National Assembly was instrumental to the approval of the applications made by the executive arm of government to go for the loans in the first place.
“How come the National Assembly failed to thoroughly screen the documentations and also did not ask the right questions? The story trending is that the China loans were signed in Chinese language is scandalous. This is dubious and shows that there is a hidden agenda by the Chinese government to completely enslave the economy of Nigeria in the near future should the government fail to comply with the obligations stated in Chinese language which the Nigerian officials are not conversant with.
“Nigerians must be told in clear terms why the federal government accepted to append the signatures of government officials to a loan document that is not written in the official national language of Nigeria which is English which the Chinese people are very conversant with. The mere fact that this is the case is enough to raise suspicion about the sincerity of purpose for applying to get a loan which will even be used by the same people providing the fund. It is ethically wrong for a creditor to give you loan and give the condition that the projects to be done with the loans must be executed by a firm that it has approved.
“This allows for insider abuse and this will inevitably not permit for the global best practices to be observed strictly since the country advancing Nigeria the loan is the same that will provide the contractors to benefit from the loans. This is against our national interest because these Chinese firms will give Nigeria substandard jobs and the country is under the pressure from the loan givers to accept whatever is passed off as a project. The idea of going for this sort of loan from China is legally and ethically wrong in the first instance.”
For Civil Society Legislative Advocacy Centre (CISLAC), the decision though laudable is rather reactive and not proactive.
CISLAC’s Executive Director, Malam Auwal Musa Rafsanjani, said it behooved the lawmakers to live up to the expectations of Nigerians on the issue.
According to him: “The questions that should be at the front burner are: what are the processes outlined by our constitution and the different enabling laws as regards the process of borrowing and what it is to be used for?
“We recall back even during the military regime in Nigeria, there was a debate on borrowing before it was carried out. Today in a democratically-elected government, papers are served to National Assembly and they hurriedly approve in a couple of minutes. What their intentions or fears are is not fully understood by the general citizenry for which they represent.
“Then latter they come back to set up a committee to probe the loan. Wasn’t it their responsibility ab initio to scrutinize the purpose, analyse the cost and benefit, both in the short and long run, and make sure that it is in tandem with the Fiscal Responsibility Act 2007 of the Federal Government of Nigeria?
“On the issue of adherence to Fiscal Responsibility Act – it is quite pathetic that the government of Nigeria through its politically elected and appointed officers undermines the laid down laws of the country. The Fiscal Responsibility Act 2007 established a commission whose mandate is “promoting prudent and transparent fiscal management in Nigeria”. This commission whose mission is “to ensure that revenue raising policies, resource allocation decisions and debt management decisions are undertaken in a prudent, transparent and timely fashion” is never around the corridors where the decision to borrow is made.
“This is in total contravention of Part X, section 44 (1) & (2) of the FRC Act 2007. Any government in the federation or its agencies and corporations desirous of borrowing shall specify the purpose for which the borrowing is intended and present a cost-benefit analysis, detailing the economic and social benefits of the purpose to which the intended borrowing is to be applied; without prejudice to sub section (1) of this section each borrowing shall comply with the following conditions as the existence of prior authorization in the appropriation or other Act or Law for which the purpose for which the borrowing is to be utilized; and the proceeds of such borrowing shall solely be applied towards long-term capital expenditures.
“We are left with the question: is there any intention that seeks to undermine due process in the act of foreign debt administration for which the responsible institution is always not on the table of discussion?
“Things to note are that loans are not serviced or paid from political office holder’s salaries, it is from the taxes paid from the people of the country who the government do not even provide the basic infrastructure to aid their income process from which they pay the taxes. So, if the ultimate burden bearer is the ordinary citizen, why are they not in the picture when these decisions are made?
“The representatives of the people – the National Assembly – should step up their game to make sure that the people are carried along through public hearings and citizens’ dialogue for their take before these decisions are made.
“We have become a country of loans; we have lost touch with the titles of these loans because of how numerous they have become. And still we don’t see what they are taken for; they should reflect in the lives of the citizens who contribute to their servicing and repayment.”
While adopting the motion entitled ‘The Need to Review & Renegotiate Existing China/Nigeria Loan Agreements,’ the House also mandated its Committees on Treaties, Protocols and Agreements, Finance as well as Debt Management to liaise with the Ministry of Finance and the Debt Management Office to seek for review or outright cancellation of latest China loans to Nigeria on the principle of force majeur.
It also decided that henceforth loans should be in tandem with statutory obligations as prescribed by the Fiscal Responsibility Act. The lawmakers claimed that they were not in the picture on how most of the loans were collected and utilised in spite the powers of appropriation conferred on them by the 1999 constitution as amended.
The motion read full: “Notes that whereas there is widespread global concern about the fraudulent, irregular and underhand characteristics of Chinese loan contracts with African states which have resulted to a new form of economic colonialism foisted by China, there is an urgent need to subject all subsisting Nigeria/China contractual loan agreements to forensic fiscal scrutiny and review.
“Aware that records from Nigeria’s Debt Management Office (DMO) reveals that the People’s Republic of China emerged Nigeria’s major creditor under the bilateral deals, with $2.3b out of $3.3b. And that The EXIM Bank of China is Nigeria’s biggest bilateral creditor in nearly two decades, having lent the African largest economy $6.5 billion (or N1.9 trillion) since 2002.
“Further aware that based on separate Freedom of Information replies by the Finance Ministry and the Debt Management Office, and published by The Guardian on Sunday Magazine of 03 November 2019, Nigeria has obtained 17 Chinese loans to fund projects across sectors since 2002 as follows:
“Transportation and ICT sectors have six projects each financed by loans from the Chinese bank, while energy, agriculture and water sectors, respectively, have three and two projects tied to Chinese loans.
“Notes further that according to Daily Post of 5 September 2018, the first Chinese loan to Nigeria was agreed on March 27, 2002 as follows: $114.89 million each for constructing two 335 MW gas power plants, namely Omotosho and Papalanto (Olorunshogo) in Ondo and Ogun States, respectively. Both plants were completed in 2007. The loan was obtained at six per cent interest rate. The loan covered 65 per cent of the costs of the project, while Nigeria then covered the 35 per cent balance.
“Four months after, two other loans totalling $159.83 million for rural telephony were offered at a 3.5 per cent interest rate. Then from 2006 to September 2018, the country obtained 13 more loans, at between 2.50 per cent and 3 per cent interest rates.
“The last loan obtained by the government from China was $328 million used for the National ICT Infrastructure Backbone II Project. At the last count Nigeria has obtained 17 Chinese loans to fund different categories of capital projects and Nigeria would still be serving the Chinese loans till around 2038, the maturity date for the last loans obtained in 2018.
“Concerned that the IMF as reported in The Guardian of 3 November 2019 had raised the alarm that most of the Chinese deals are not Paris Club-compliant, and for which the the World Bank has blacklisted six Chinese companies currently operating in Nigeria over alleged fraudulent corrupt practices including deceptive tactics, illicit trade, extortion, Greek gifts and neo-colonial proclivities.
“The companies, according to an announcement published on the World Bank’s website are CCECC Nigeria Railway Company Limited, CRCC Petroleum and Gas Company Limited and CCECC Nigeria Company Limited. Others are China Railway Construction (International) Nigeria Company Limited, China Railway 18th Bureau Nigeria Engineering Company Limited and CCECC Nigeria Lekki (FTA) Company Limited.
“Further concerned that one of the blacklisted companies, China Civil Engineering Construction Corporation (CCECC), is the major vehicle through which Chinese projects in Nigeria are financed. This much has been corroborated by Minister of Transportation, Rotimi Amaechi, who stated that since China was financing the projects through the China Civil Engineering Construction Corporation (CCECC), the contractors had 100 per cent execution right on them. This means that materials and skills are imported from China thus undermining local industry and jobs.
“Conscious of the fact that some of the latest loans tied to the said CCECC as reported in The Guardian of 3 March 2020 are as follows: On railway alone, this administration has recently signed loans mainly categorised under Belt and Road Initiative (BRI)’s government to government agreements of approximately $17 billion with China Civil Engineering Construction Corporation, a subsidiary of the state-owned China Railway Construction Corporation.
“The Federal Government in 2016 signed a $5.1 billion Kano – Kaduna and Port Harcourt- Calabar rail contracts; in 2018, the country signed a $6.7 billion for Ibadan-Kano rail; it signed in 2019, a deal worth $1.488 billion for Lagos–Ibadan rail and again in 2019 signed another loan for construction of $3.9billion Abuja–Warri rail.
“Worried amidst widespread allegations of heavily inflated Chinese contracts and fears expressed by stakeholders that most of the projects allegedly did not follow extant regulations, particularly the Public Procurement Act, which enforces tendering or competitive bidding.
“Similarly, industry watchers have also raised fears over why the Public Procurement Bureau (PPB), the National Assembly and Debt Management Office were bypassed in the approval and execution of these loan regimes, knowing full well that 70 per cent of the corruption in the country is being fuelled by contracts.
“Notes too that Nigeria is the most vulnerable in the bilateral loan pacts with China because we are susceptible to currency volatility risks. Such risks, most often, are transferred to the country with a weaker economy. In this connection, we must heed the warning of the IMF Director of Monetary and Capital Markets Department, Tobias Andrian, who told The Guardian Sunday Magazine of 3 November 2019, that because these Chinese loans do not conform to the Paris Club standards, if there is any debt restructuring down the road one day, that can be very unfavourable to those debtor countries.
“Further concerned that according to BusinessDay of 14 May 2019, countries like Sri Lanka, Zimbabwe, Djibouti, Zambia, Namibia, Kenya and Angola among other countries are at the verge of forfeiting their infrastructure to China over unpaid debts. Industry watchers such as a former Deputy Governor of Nigeria’s Central Bank, Mr. Obadiah Mailafiya, who played a key role in Nigeria’s debt relief negotiations with the Paris Club of public creditors in 2005, and Dr. Oby Ezekwesili who also helped Nigeria’s debt forgiveness during her time as Director at the World Bank have warned that the assistance from China will come with a price of economic takeover if Nigeria is unable to repay her loan. Chinese attitude to indebtedness is the hardest in the world; they don’t offer debt relief or cancellation.
“Further worried by the startling revelation as published in an online article by Mma Ama Ekeruche in Stears Business: Economy 26 October 2018, that Chinese companies generate their highest revenue from Nigeria. Between 2000 and 2016, these companies have earned $34.2 billion from implementing projects in Nigeria, some of which are tied to loan agreements. On employment, about 64,500 Chinese workers are employed locally; thus we are forgoing alternative streams of income and jobs.”
Recall that in April 2019, the IMF warned African countries, particularly Nigeria, against embarking on wholesale borrowings from China struggling with a €70b debt burden that rose from €62b in 2017, which represented 12.25 per cent increase in one year. The IMF further argued that loans from China were contracted under concessional terms, without consideration to the Paris Club debt servicing arrangements.
Specifically, IMF’s Andrian, while admitting that borrowing from the country is good, however, raised concerns about Nigeria and other emerging market countries taking loans from China without considering the terms of such facilities in compliance with the Paris Club arrangements. He thereby warned that the terms of such loans had become questionable overtime