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Thoughts on Nigeria and Chinese Loans - Reuben Abati

Politics	1485 VIEWS
Politics
1485 VIEWS

Tuesday, August 04, 2020 / 13:27 PM / OpEd by Dr. Reuben Abati / Header Image Credit: Ecographics

The relationship between Nigeria and China with regard to loans obtained from the latter to fund Nigeria's infrastructural projects suddenly became a matter of legislative intervention and public scrutiny last week when the House of Representatives summoned the Minister of Transportation, the Minister of Finance, Budget and National Planning and the Minister of Communications and Digital Economy to appear before it on August 17. The Ministers are expected to explain certain clauses in the Agreement signed between Nigeria and the Export-Import Bank of China with regard to a loan of $400 million for the country's National Information and Communication Technology (ICT) Infrastructure Backbone Phase II Project. The agreement was signed in September 2018 by the Federal Ministry of Finance on behalf of Nigeria (the borrower). Nigeria's lawmakers have raised eyebrows about a clause therein which waives Nigeria's sovereign immunity if it defaults in its repayment plan.

The contentious clause is Article 8(1) which provides inter alia 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 proceedings pursuant to Article 8(5) thereof with the enforcement of any arbitral award pursuant thereto, except for the military assets and diplomatic assets." This has been interpreted to mean that Nigeria is in danger of losing its sovereignty to China.

The opposition People's Democratic Party (PDP) has seized upon it to proclaim that it has been vindicated because it has always argued that the mission of the ruling party, the All Progressives Congress (APC) has always been to mortgage the future of Nigeria. PDP Presidential candidate in the 2019 General elections, Alhaji Atiku Abubakar, quickly added that Nigeria faces the risk of embracing the fate of Zambia with regard to Chinese loans. Groups and stakeholders in civil society, including lawyers and the Socio-Economic Rights and Accountability Group (SERAP) have asked that all agreements ever signed between Nigeria and China should be brought forward and subjected to close scrutiny, just in case any government official either out of ignorance or incompetence has committed Nigeria to a debt-trap, to the disadvantage of future generations.

From the government's side, the only man who has spoken up is Rotimi Amaechi, the Minister of Transportation, but his explanations do not seem to address the issue. He says for example, that the waiver of immunity in the agreement is merely "a contract term", a sovereign guarantee. Nobody is convinced. Amaechi and his colleagues who have been summoned by the House of Representatives would have to do much better than that. Nigerians no longer trust their government when it comes to international agreements. The quoted Article 5(1) in the said agreement with the Export and Import Bank of China rings too familiar and too topical in the light of recent revelations about the handling of Nigeria's agreement with a certain Process & Industrial Development (P&ID). In that case, still on-going, a sum of $9.6 billion is still pending against Nigeria, just because some Nigerian officials signed an agreement that put the country into trouble.

Now, again, in the case of China, the aforementioned Article 8(1) refers to such words as "arbitration", "property", "enforcement of arbitral award". These are the same key words in the P&ID case. Hence, additional questions need to be raised about the Chinese agreement: who signed the agreement? Was due diligence carried out? Was Nigeria thrown under the bus by the negotiators as has been alleged in the P&ID case? Ordinarily, a waiver of sovereign immunity does not mean that China will take over the running of Nigeria. Sovereign immunity is a principle in customary international law which simply means that a state cannot be pushed around by another state without its own consent to be so treated, in a foreign court. Hence, in every agreement that may go to arbitration, there is usually an agreement as to the place of arbitration and other details.

What exactly did Nigeria sign up to on September 5, 2018 with the China EXIM bank? To the extent that the Nigerian people have a right to know, I am convinced that the House of Representatives is in order to raise the questions before us.

To go further, the various stakeholders who have asked for a proper audit of all agreements with China are definitely aware of how the $6.6 Billion judgment against Nigeria which became $9.6 billion (because of accrued interest) in the P&ID case poses a serious risk to the country's economic survival. They are also probably aware that there are similar cases relating to lack of due diligence in the signing of agreements that Nigeria is also grappling with. This includes the international arbitration in Paris with Sunrise Power and Transmission Company over the Mambilla Hydro Power Plant. Sunrise went to arbitration accusing the Nigerian government of breaching a 2003 agreement when it granted a separate contract to Chinese companies. The same Export-Import Bank of China was on the sidelines of that agreement. I understand the matter has been resolved but 17 years after the initial agreement, the country is yet to make any significant progress with the Mambilla Hydro which if things had progressed as scheduled would have emerged as the second largest hydro power plant in the whole of Africa. In this case, as in others, Nigeria remains behind because some characters failed to do the right thing. Similarly, the Ajaokuta Steel Company Limited which was meant to be a game-changer for Nigeria's industrial growth process, was also held down for years by disagreements over agreements and a prolonged legal tussle between the Federal Government and a company called Global Infrastructure Nigeria Limited (GINL). Ajaokuta Steel is a living archetype of how all good intentions in Nigeria fail. In one word, legal tussles and arbitral disputes over contracts, obligations and commercial agreements have over the years, exposed the failure of public policy and the incompetence of state officials in Nigeria.

Minister Amaechi is concerned that if the same controversy is brought to the door-step of the Chinese, they may simply refuse to provide necessary loans for the Ibadan-Kano rail line. Amaechi appeals to the patriotic instincts of Nigerian lawmakers: he wants them to suspend all further enquiries until Nigeria gets an additional $5.3 billion from the Chinese. He means well no doubt, he wants Nigeria to get that Chinese money that Nigeria needs, but in his appeal lies the bigger question about Sino-Africa relations, and the place and conduct of African leaders within that matrix.

Amaechi is certainly an admirer of China's romance with Africa. He begs his own country's parliament to "mechionu" as Igbos would say, so Nigeria can get more Chinese money and sign more agreements. Someone needs to tell Rotimi Amaechi that Nigeria's engagement with China cannot and should not be reduced to an Abiriba, Aba, or Alaba market transaction business model: "my brother, bring money make we do business, chop together." But he is not alone. Many African leaders are like that and as they engage China, they fail to look at the sub-text.

In the 70s, China was far behind many African countries. I grew up in a country where any product that was made in China or Taiwan was derisively dismissed. China and Taiwan were the standard euphemisms for fakery, inferiority and cheapness. In those days, Nigerians talked about the British Standard (BS). Nigeria's economy was doing well. The Naira was at par with the pounds sterling. Nigerians travelling to London on Fridays aboard Nigeria Airways, stopped by at Liverpool market and the Main street and spent money as if it was going out of business as a legal tender. This was the age of the oil boom. No Nigerian would touch anything Chinese. I grew up being told that anything Chinese or Taiwan does not last. Even when this COVID-19 break-out began, I heard some older Nigerians insisting that if indeed the virus originated from China, it would not last, because nothing that comes from China can be relied upon. Unfortunately, China pulled itself up by the boot-straps. China re-invented itself while other countries either went to sleep or became complacent. It is ironic that today, Nigeria adores China. In our class at the University of Maryland, College Park, 1996 -97, in an American Foreign Policy Process class taught by Hodding Carter III, in the Department of Government and Politics, we read a book titled "The Coming Conflict with China". That conflict then was at best hypothetical. Today, it is a reality. China is one country that has leap-frogged into the future in an unimaginable manner. The emergent conflict between China and the Western world will be the most definitive factor of this century and the next to come. Africa and the developing world are both at the centre of that conflict.

With China thus on the ascendancy, its leaders defined for that country, broad geo-political ambitions. With the West in retreat and increasingly navel-gazing, protectionist and isolationist, China launched a muscular approach to foreign policy with its Belt and Road Way Initiative through which it sought to engage developing economies by way of financial support through loans and grants. The focus has been so far, infrastructural development but there is a lot more in there. Strategically, therefore, long before COVID-19, China tried to fill a vacuum that Western nations created. As Western creditors prescribed more and more stringent conditions for bilateral and multilateral loans, China offered cheap, easy and accessible alternative financing arrangements: interest-free government to government credits, and preferential loans from China EXIM and the China Development Bank. The latter, that is preferential loans, represents the bulk of China's overseas lending. Developing countries were over-excited. They swooped on China's offers like bees after nectar. Today, China is the world's largest creditor to the developing world. Since 2008, China has been Africa's main trading partner. There is even now in place, a Forum on China-Africa Co-operation.

Nobody saw the catch, and countries were caught flat-footed. China has been accused of debt-trap diplomacy. Many countries embraced that diplomacy with their hands tied behind their backs and today, their countries are in the throes of debt servitude. China gives but it takes! China helped Sri Lanka to build the port of Hambantota. Both countries signed an agreement, similar to the one Nigeria signed with the Export-Import Bank of China. Today, China runs that port with Chinese personnel. In Djibouti, the Chinese are in charge of the ports too, just because Djibouti borrowed money it could not pay back. In Zambia, for similar reasons, China is now controlling the Zambia National Broadcasting Corporation (in other words, China is in charge of mind control in Zambia). China is also planning to take over the Zambia National Electricity Company. Djibouti took loans from China to build a new port and two new airports, Unable to repay its loans, China has also taken over a part of Djibouti's sovereign rights and possession of its new port, and has since set up in that country, its first military overseas base. There have been issues as well, with China's relations with Kenya, Democratic Republic of Congo and other African countries.

But should we blame China?

Whatever travails developing countries may have gone through in the hands of China, in the form of damages to their sovereignty, we must all agree on certain basic points. One, "there is no free lunch". China is not offering anyone a free lunch. Its cheap loans are tied to its own strategic interests in the world. African nations are the ones submitting themselves as pawns to China's global strategic agenda. African leaders are most certainly complicit. Two, "when you borrow, you pay". Chinese negotiators are often focused. If you don't pay in cash, you will pay in kind. The Chinese only give out their loans even under the Belt and Road Initiative to countries that have something to offer in return. Many developing countries are so economically narrow and badly managed, they end up giving up national resources for borrowed funds that translate into debt servitude. Three, and this is the worst part, is that Chinese loans are often opaque. This is one of the reasons China is not a member of the Paris Club. It may have committed to the G-20 process on the moratorium for debt service re-payments for example, but China has stubbornly refused to participate in data calls. It is the biggest player in Africa's infrastructure boom but it may never disclose the full details.

China's influence in Africa even runs far deeper. In Nigeria, that influence has gone beyond loan agreements that touch on sovereign rights to an increasing ubiquity of Chinese presence in Nigerian lives. It is so real that the Chinese have now taken over a rather complicated business chain in the country from manufacturing to retail, including internet services, hospitality, car sales and ride hailing services. One of these days, we may wake up to see a Chinese roasting corn by the road-side in Nigeria, properly licensed to do so!

Nigerian lawmakers have a responsibility to shout out about Nigeria's sovereignty, and the integrity of agreements with China or others. We certainly don't want to hear that a certain Amaechi has signed off Nigeria's Presidential Villa to the Chinese to get cheap loans to build a rail line to Port Harcourt! If that were to be the case, the Chinese will take over that Villa and like P&ID, look at us all in the face, talk about the sanctity of agreements, and dare Nigeria to go to the court of international arbitration. The onus is on Amaechi and co to tell us what we need to know. The Chinese knee is on our necks today, simply because our leaders have failed to lead us aright.