Controversy: Nigerian Rail Projects and the China Debt Trap

Controversy: Nigerian Rail Projects and the China Debt Trap

Saturday, August 1, 2020 1:44 pm

Amaechi inspecting one of the rail projects

By Ademola Adegbamigbe

China’s loan to Nigeria to finance heavy projects like the railways is currently generating acrimonious debates. On one side are people who believe that there is nothing wrong with obtaining such facility. On the other are critics who are ready to swear by their grandfathers’ coffins that a foreign loan like this could erode a debtor country’s sovereignty.

This controversy started when Mr Rotimi Amaechi, Transport Minister, granted an interview about the terms of the loan agreement. In his words: “I have told the House of Representatives that first I just got to know that there is a clause in the agreement (with China). It is simple; for example, the loan to construct Ibadan to Kano rail is $5.3bn. The implication is that if by the end of the day, you don’t pay back our money, whatever we need to take from you, we will take from you. But what the Chinese normally do is that they go after the same asset to recover their money. So what is wrong with that? It is part of their responsibility, but for now they will jeopardise the ability of government to raise money if we continue to ask questions that will make China to raise eyebrow and start wondering what is wrong.”

-Watch the video here

He warned that the country might lose such facilities for the Port Harcourt-Aba, Umuahia-Enugu, Markurdi, Gombe, Jos, Damaturu and Maiduguri projects. The Minister added that Nigeria could also lose the money it seeks for the Ibadan to Kano rail project, which include Ilorin, Minna and Kano. He added, “And then the loan for Lagos to Calabar being pursued with the Russians may also be lost, and the areas covered include Ore, Bennin to Asaba, Onitsha, Warri, Uyo, Calabar.” He told journalists further that Federal Government had “mapped out plans to repay the loans, as an escrow account had been opened to pay in the money.”

One of the critics, Igbonekwu Ogazimora, warned: “Did you hear Amaechi? If the Chinese gives you money, they ask you to waive your sovereignty and this means they will go after the very asset they built to recover their money.  And how do they take over assets without some measure of force? They bring in their police and army to do so. That is what they are doing in Zambia and some other countries. Before you know it, Nigeria is a Chinese Colony. It is in the interest of Nigeria that the federating units, States, make it clear they are not part of this or we find ourselves as slaves in a few decades from now.”

China has become the Shylock (in Shakkespeare’s Mechant of Venice), of contemporary times. It is also like the situation in the Bible (2 Kings 4:1 ) when the wife of a man from the company of the prophets cried out to Elisha, “Your servant my husband is dead, and you know that he revered the LORD. But now his creditor is coming to take my two boys as his slaves.” According to a publication by New York Times, China’s drive to become the developing world’s biggest banker is backfiring. “Over the last two decades, it unleashed a global lending spree, showering countries with hundreds of billions of dollars, in an effort to expand its influence and become a political and economic superpower. Borrowers put up ports, mines and other crown jewels as collateral. Now, as the world economy reels, countries are increasingly telling Beijing they can’t pay the money back.”

There is a consequence though. As contained in the report, “China is politically on the back foot,” said Andrew Small, senior fellow at the German Marshall Fund. Should China foreclose on those loans, he added, “they would be taking over strategic assets in countries that now can’t afford to feed their people.” China, according to the same report, embarked on what it called the Belt and Road Initiative, “President Xi Jinping’s $1 trillion program to finance infrastructure projects across the world and pick up allies in the process. Since the initiative started in 2013, the report has it that, “China has lent up to $350 billion to countries, about half of them considered high-risk debtors.”

In Africa alone, there are 10 countries that are heavily indebted to China, according to a publication by Angola is the most with an estimated debt of over US$25 billion. “Shocking, but that’s the reality at hand. Most of Angolan oil is going towards the repayment of Chinese debts, despite Angola being the second largest producer of oil in Africa.”

Ethiopia has an estimated debt of US$13.5 billion; Kenya, US$7.9 billion for infrastructure; The Republic of Congo, US$7.3 billion; North Sudan, US$6.4 billion; Cameroon, US$5.5 billion; Nigeria, US$4.8 billion; Ghana, US$3.5 billion, DRC, US$3.4 billion. The report indicated that DRC was “quick to exchange mineral resources for loans with China.” Zambia also owes China US$6 billion. The medium added as a matter of fact, “China is taking Zambian firms as part of repayment plans, and there were reports that ZESCO, the national power utility, was being taken over by China, even ZNBC, the country’s national broadcaster.”

It is this fear of China’s take-over of Nigeria’s national assets that has kept adrenaline boiling.  Thus, Achilleus Chud-Uchegbu, journalist, put forward a poser, based on the Article 8(1) in one of the Commercial Loan Agreements between Nigeria and the Export-Import Bank of China. It says: “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.” What do you make of this clause?, he asked.

Richard Akinnola, veteran media man, in a post, China Loan and Our Sovereignty, argued: “Did you remember Operation Thunderbolt on the RAID ON ENTEBBE during the Idi Amin murderous regime in Uganda in 1976, when Uganda held 106 Israelis hostage at the Entebbe airport?” The Israeli forces, in a daring rescue operation, according to Akinnola, flew down to rescue the hostages. Why was it easier for them to study the various aspects of the airport? He answered the question himself. It was because the Israelis built it. They knew how to navigate through the various crevices of the airport. “When you contract your infrastructures to foreigners, you actually cede your sovereignty. So, you must not complain when you renege in contractual clauses.”

So, na which sovereignty una dey talk about sef on the Chinese rail loan? $5.2 billion na moi moi? In the present circumstance, China na AMCON o and would take over the assets they built if we renege in repayment. Or didn’t the Bible tell us in Proverbs 22:7 ? “The rich rules over the poor, and borrower is slave to the lender”.

Mr Femi Falana, a Senior Advocate of Nigeria, segued also that the most fundamental issue is whether we really need these jumbo loans. He added: “Last year, I requested the national assembly to assist the country to recover $105 billion instead of approving all manners of loans for the Executive .The Senate President replied and assured me that the matters raised in my letter would be addressed. But no action has been taken since then. As if that is not enough a serving Minister has said that $62 billion out of the fund cannot be collected from debtor IOCs.”

Falana was actually referring to what the  Oil minister, Timipre Sylva, said that Nigeria knows it cannot recover $62 billion from oil majors despite ongoing cases against the companies for money the government believes it is owed.

“Nobody can bring out that kind of money,” Sylva told reporters after a weekly cabinet meeting in Abuja. “I mean, we can’t get $62 billion. We can maybe get something from them but not $62 billion. It’s an opportunity we have lost.”

According to a report by Reuters,  Nigeria has been fighting for the cash under a 1990s law that states it can revisit production-sharing contracts on oil output if crude prices exceed $20 a barrel.

It went further: “Sylva said talks about recouping some money from oil majors, such as Shell, Chevron, ENI and ExxonMobil, were ongoing. The companies received individual requests for cash in February, with one telling Reuters its bill was nearly $10 billion. Shell and Chevron are fighting the cases in court, according to scheduled cases seen by Reuters. Sylva said the government must quickly pass amendments to the underlying law to ensure it did not miss out on more revenue.

“We have to ensure that this bill is passed. With this bill now, there will be some adjustments in the fiscal regime and we believe that the government will get a lot from the oil companies, especially their deep shore exploration activities.”

However, there are Nigerians who do not see anything wrong with the debt. Emeka Duru Alex, journalist and social critic, submitted: “When a country goes into a commercial relationship, it waives its immunity to appear before a court or arbitration panel in the face of default. It is left for the borrower to ensure that its interest is also protected by inserting clauses that will ensure that the lender does not shortchange it in releasing the sum agreed on.”

Okoro Chigozie Kennedy was on all fours with him. He argued. “By the way I believe the right person to be questioned by the House of Reps on Legal Clauses in our Loan Agreement with China for the Railines is the Attorney General of the Federation and not a lay man like Chibuike Amaechi.”

The House of Reps, according to him, only succeeded in sensationalising the “Sovereignty  Waiver” clause which is a basic normal requirement in such agreements with Sovereign States to ensure they could be subject to Arbitration Procedures in Foreign Climes which is preferred by most Foreign Investors due to our comatose Judicial System. Key issue, as he put it, is what Commercial Assets are to stand as collateral should Nigeria fail to pay the loans apart from our Millitary and Diplomatic Assets?

Otunba Yemisi Shyllon, a lawyer and engineer, was worried that we seem “to be chasing the shadow on this Chinese loan, rather than address other pressing issues about the loan/project. Such issues such as if the loan being sought is not unduly over loaded, or is the loan hard or soft?” Other issues we should be considering are, according to him, the size of the annual lending rate proposed , the payment years, “whether or not, there is some period of moratorium attached, or whether we can better repackage the project for private sector involvement/ management etc , etc?”

However, Amaechi, in a statement on Saturday, 1 August explained: 

“The trade agreement between Nigeria and China, the ministry of transportation does not take loan, everything about loan is directed to the Ministry of Finance, so,  I couldn’t have signed any loan because I don’t take loan.

“What I signed is what is called commercial contract, which is contract between the Federal Government and CCECC as a contractor, the contract between Nigeria and China is usually signed by the ministry of finance.

“Whether is the ministry of finance that signed it or the ministry of transportation, the issue is that nobody will give you loan free of charge.

“There must be an agreement and such agreement must contain some terms, that doesn’t mean that you are signing away the sovereignty of the country, no country will sign out its sovereignty.

“What clause 8 says is, I expect you to pay according to those terms we have agreed, if you don’t pay, don’t throw your immunity on me when I come to collect back the guarantee that was put forward, that is all.

“We are paying the loans. In the same National Assembly sitting, they were told that of the 500 million dollars loan, we have paid 96 million dollars already, Nigeria is already paying.

“And the 500 million dollars was not taken by us, it was taken by President Goodluck Jonathan in his term and that clause was there.

“Nigeria has the capacity to pay back for the period of 20 years at 2.8 per cent, which country will give you that loan? Secondly, these loans are not given to us, they are paid directly to the contractors.

“Once they sign that the job has been done, they pay the contractors and that has never happened before and this project are in place. Are they trying to rubbish the fact that there is a railway from Abuja-Kaduna?

“There is no loan in Nigeria, either internal or external that is not approved by the National Assembly, none.

“Chinese government will not even give you a loan without an approval by the National Assembly because if they give you a loan without the approval from NASS that is no loan.”


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