Sunday, August 23, 2020 4:50 pm
By Tony Iyare
Resolving the riddle of Nigeria’s debt to China may get enmeshed in the country’s familiar matrix of sociology of figures. In other climes, two plus two is simply four but here, the answer could be lurking in the wind. It appears easier reaching for a pin in a haystack than trying to know the actual debt owed to China by Nigeria which now seems to be caught in some brick wall.
Either from the National Assembly, Presidency, Debt Management Office (DMO) or by other government officials, the public space is regaled with different figures that leave the citizenry virtually confused like every enquiry into statistics of other facets of our life.
The administration of President Muhammadu Buhari, which is pursuing a massive rail revitalisation projects, across the country with Chinese loans and prides itself as “borrowing only for infrastructure,” is also a bit edgy and opaque on the issue, reinforcing growing scepticism.
DMO and Presidency
Two weeks ago, the DMO in a statement jointly signed with the Presidency, explained that total borrowing from China as at March 21, 2020 amounted to $3.1 billion. This they claim represents a paltry 3.9 per cent of the country’s total debt put at $79.3 billion. However, checks indicate that the debts owed to China were grossly understated.
“As at March 31, 2020, the Total Borrowing by Nigeria from China was USD3.121 billion. This amount represents only 3.94% of Nigeria’s Total Public Debt of USD79.303 billion as at March 31, 2020. Similarly, in terms of external sources of funds, Loans from China accounted for 11.28% of the External Debt Stock of USD27.67 billion at the same date. These data, show that China is not a major source of funding for the Nigerian Government,” the statement says.
Giving further insight on the terms of the loans from China, they reveal that, “The Total Borrowing from China of USD3.121 billion as at March 31, 2020, are concessional Loans with Interest Rates of 2.50% p.a., Tenor of Twenty (20) years and Grace Period (Moratorium) of Seven (7) years.
Explaining reasons for the loans, the government says, “The USD3.121 billion Loans are project-tied Loans. The projects, (eleven – 11 in number as at March 31, 2020), include: Nigerian Railway Modernization Project (Idu-Kaduna section), Abuja Light Rail Project, Nigerian Four Airport Terminals Expansion Project 2 (Abuja, Kano, Lagos and Port Harcourt), Nigerian Railway Modernization Project (Lagos-Ibadan section) and Rehabilitation and Upgrading of Abuja – Keffi- Makurdi Road Project.
“The impact of these Loans is not only evident but visible. For instance, the Idu – Kaduna Rail Line has become a major source of transportation between Abuja and Kaduna. Also, the new International Airport in Abuja, has improved air transportation for the populace, while the Lagos – Ibadan rail line when completed, will ease traffic on the busy Lagos -Ibadan Expressway.
“The projects also have the added benefits of job creation, not only by themselves but through direct and indirect service providers, a number of which are Small and Medium Enterprises. It is widely accepted that investment in infrastructure is one of the most effective tools for countries to achieve economic growth and development. Using Loans from China to finance infrastructure is thus in alignment with this position”.
Railway Extension to Abuja
It’s curious why such an exhaustive statement was silent on the whooping $3.9 billion (N1.4 Trillion) contract signed in October 2019 to extend the Itakpe-Ajaokuta-Warri railway to Abuja, the Federal Capital Territory with a 50 kilometer link to Lokoja.
The contract for the new 302.6 kilometer Abuja-Itakpe-Lokoja rail line was awarded to China Railway Construction Corporation (CRCC) under a public-private partnership.
Expected to pass through Baro, which now has an inland port, the rail line will also link Lokoja, the Kogi State capital. As part of the agreement, the Chinese firm will also construct the Warri deep seaport.
Minister of Transport, Mr Rotimi Amaechi stated that Nigeria will contribute 15% of the project cost, CRCC will invest 10% while CRCC will borrow the remaining 75% from Special Purpose Vehicle (SPV). The company will also be responsible for managing the rail network until the loan is repaid, after which the project will be handed over to the federal government.
“We will give them sovereign guarantee and they will give us performance bond that protects our sovereign guarantee. When they finish construction, they will manage for 30 years,” he explained.
The House of Representatives, which claims it is evaluating $33 billion contract loans, had raised the alarm over clauses in Article 8(1) of the commercial loan agreement signed between Nigeria and Export-Import Bank of China, which allegedly concedes sovereignty of Nigeria to China in the $400 million loan for the Nigeria National Information and Communication Technology (ICT) Infrastructure Backbone Phase II Project, signed in 2018. This loan was never mentioned in the statement released by the DMO and the Presidency.
The controversial clause in the agreement signed by Federal Ministry of Finance (Borrower) on behalf of Nigeria and the Export-Import Bank of China (Lender) on September 5, 2018, provides 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 proceeding pursuant to Article 8(5), thereof with the enforcement of any arbitral award pursuant thereto, except for the military assets and diplomatic assets.”
Amaechi fears this inquiry by the House of Representatives may stir the hornet’s nest and imperil the $5.3 billion loan expected to underwrite the cost of building the 2,576 kilometer Ibadan-Kano standard guage railway expansion. He says it may also jeopardise the $11.1 billion loan for the proposed 1,400 kilometer Lagos-Calabar coastal railway to be built by the Russians and the $3.5 billion loan for the construction of the 2,000 kilometer Port Harcourt-Enugu-Maiduguri standard guage railway.
“If you are telling the man who lent you money you don’t like the way he lent you, he won’t lend you any further.
“For this one (Lagos-Ibadan rail project), we have $1.6bn for which we are contributing about $200 and $300 million. But don’t forget, they have not finished paying, they can stop at any time,” he warns.