More attention should be paid to what loans are used for, and if they are judiciously spent, rather than raise a false alarm over standard lender-borrower contracts, writes Demola Ojo
Penultimate week, a House of Representatives panel raised the alarm over “clauses conceding Nigeria’s sovereignty to China” in a loan agreement, when Minister of Transportation, Rotimi appeared before it.
The “discovery” of the clause pitted the National Assembly against the Federal Executive Council (FEC) with critics arguing that the clause should not have been included in a commercial agreement.
According to article 8(1) of a 2018 commercial loan agreement between Nigeria and the Export-Import Bank of China, “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, last week, explained during a TV interview that the contentious clause was only a contract term, a sovereign guarantee that assures payback according to the terms and conditions of any loan.
“The contract between Nigeria and China is usually signed by the ministry of finance on behalf of Nigeria, but that will be escaping the issue. Whether it is the ministry of finance that signed it or the ministry of transport, the issues are the issues.
“There is no contract without an agreement and that agreement must contain some terms and one of the terms that this one contains, is not that you’re signing away the sovereignty of the country. No country will sign away its sovereignty. What you do is, you give a sovereign guarantee; and I’m ashamed of those who interpret it the wrong way,” he said.
He made clear that by waiving the immunity clause, the lender has a right to reclaim assets built by the borrower with the loan to help it recover funds, in case there is a default in payment.
“The waiving of immunity simply means in trade parlance that I’m not giving you this loan free,” he explained. “…The Chinese will never take over what was not constructed with the loan.”
To allay fears, Amaechi further revealed that the loan was already being repaid, with $96 million already paid out of the initial loan of $500 million. He also highlighted the low interest rate of the loan, which is 2.8 per cent for 20 years with seven years moratorium.
Amaechi also reiterated his call to the National Assembly to put a hold on the probe as some loans were still being expected for the completion of the Lagos to Ibadan railway and the construction of the rail from Ibadan to Kano and Port Harcourt to Maiduguri.
However, the distrust Nigerians generally have for politicians and government officials has necessitated that the views of respected experts be heard, to calm nerves and allay fears.
According to a former Foreign Affairs Minister, Bolaji Akinyemi, there’s usually a clause in these agreements, which is standard procedure. “A country cannot plead its sovereignty to protect it from arbitration.”
Economic relations are different from political relations he further explained. In the latter, a country can plead its sovereignty to protect it, but not in the former. It is the responsibility of the borrowing country to make sure its economists thoroughly examine the contracts to make sure they don’t lead to economic slavery.
Akinyemi also pointed out that similar clauses are in agreements signed with Western countries and financial institutions. He cautioned that Nigerians and Africans in general, be wary of the “propaganda” of Western nations regarding China and loans.
“There is nothing wrong with Africa broadening the basis of its interaction with the economic global community, rather than just being dependent on one source”, he contends. “It makes sense for us to have many economic and trading partners,” he said.
Also, the Minister of Justice and Attorney General of the Federation, Abubakar Malami, said there was a difference between international diplomatic immunity, which has to do with a nation’s sovereignty, and commercial immunity, which has to do with a commitment to ensure repayment of loans.
“Concessions relating to immunity for the purpose of provision of commercial guarantee are a normal, traditional ritual. Nations enter into respective interstate agreements and in the course of so doing, surrendering their jurisdictional immunity,” Malami said.
Stating that commercial immunity is in essence a mere guarantee that allows an advancing state an opportunity, right and power to claim back the financial advances made to a party state, he elaborated:
“It is in no way extended to perhaps concession to diplomatic immunity by which you now surrender the rights, privileges and independence of a nation state. But it is a commercial term that is restrictive, exclusive to an asset, a commercial asset for that matter in the event of default.”
Rather than focus on a clause, which is standard fare in these cases, the National Assembly will do well to closely scrutinise what loans are used for, and make sure they are expended judiciously.
Taking loans for infrastructure purposes can be defended if the projects are economically viable and stimulate industrial growth that would in turn facilitate the repayment of said loans.
However, taking loans to pay for recurrent expenditure such as salaries and increased allowances of public officials, or to pay for unnecessary and economically unviable projects like, say, rehabilitating the National Assembly complex, deserves the criticism and condemnation of concerned Nigerians.