By Raheem Akingbolu
Some experts in bilateral businesses have called on federal government to consider other options in addressing Nigeria’s infrastructural deficit, instead of the high appetite for infrastructure loans from China.
The experts who gave the warning during a one-day Webinar titled: ‘Are Chinese Infrastructure Loans Putting Nigeria on the Debt Trap Express,’ organised by the US- Nigeria Trade Council, warned Nigeria strongly against the loans; arguing that the terms are hidden “debt traps” for the country.
In his presentation, the Managing Partner & CEO, Berkham Capital UK, Joseph Oyediran, kicked against the China infrastructure loans; arguing that Nigeria at the moment is clearly exhibiting the symptoms of a country that will default payment.
According to Oyediran, the revenue streams for Nigeria to repay the loans within the specified period are not there; especially in the face of the impact of Covid-19 pandemic.
While stressing that with a debt profile put at about $65 billion, Nigeria was not looking healthy enough to repay the China loans, he described the loan as a debt trap for Nigeria, adding, that “the revenue source to pay back is just not there”, he said.
He said: “Data obtained from the Debt Management Office (DMO) shows that between 2010 and March 31, 2020, eleven loan facilities have been obtained from China Exim Bank.
“The loans which come with a seven year grace period, 20 years tenor were obtained at 2.5 per cent interest rate. While the pricing of the China loans looks cheap; there are serious concern they could be debt traps for Nigeria and many other African countries.
“The biggest fear however was the Caveat in the Chinese Loan agreement which requires a borrower to pledge its sovereignty status, sovereignty guarantee and all its sovereign assets as well as waive its immunity in any arbitration to China. The caveat is stated here in: the borrower (i.e. the State of Nigeria) hereby irrevocably waives any arbitration proceeding pursuant to Article 8(5) thereof with the enforcement of any arbitral award pursuant there; except for the military assets and diplomatic assets,” he stated.
Oyediran warned that Nigeria should not be carried away by the pricing mechanism of the loans dangled by China, but wary of the “wicked clause” that submits its sovereignty to China should it default.
He said Nigeria should learn from the experience of defaulting countries like Zambia and Sri Lanka where China has taken over assets belonging to the countries.
He, however, advised Nigeria to completely shun borrowing; set up a special energy fund from which it can finance its infrastructure.
Also speaking, the Managing Director/CEO of Cowry Assets Management, Johnson Chukwu supported the establishment of a special fund to finance infrastructure.
Chukwu, however, called for a radical change in Nigeria’s current infrastructure financing model; which he said was no longer sustainable.
He called for a legal and fiscal framework that would encourage the private sector invest in critical infrastructure such as roads and the airports.
He said the legal/fiscal framework must be tailored in a manner that would ensure the concessions are not arbitrarily revoked without recourse to the National Assembly.
“We don’t have enough revenue stream to fund infrastructure. Government is building infrastructure from borrowed fund. We cannot continue to fund infrastructure from budgetary allocation.
“We need to come up with a legal and fiscal framework that will allow private sector participation,” he said.
The Pioneer Vice Chancellor, Federal University of Otuoke, Prof. Mobolaji Aluko, provided the delicate diplomatic dimensions to the China infrastructure loans; warning also that Nigeria should run as far as possible from the debt trap.
According to him, on no account should Nigeria lift its sovereignty for any loan facility; adding that Nigeria should not stick its neck deeper in more loans.
“When you’re in a hole; you don’t dig further”, he said