- Implication for Nigeria’s future
By Olusegun Odunewu
If Nigeria is caught in debt bondage to China, it risks losing both valuable natural assets and sovereignty, as there have been instances where the Asian power house took over lands and valuable assets it helped to build through commercial loans when the beneficiary countries failed to repay the loans.
Therefore the recent probe by the House of Representatives Committee on Treaties and Agreements on loan agreements Nigeria has with lenders is coming at the right time.
The arguments by the Minister of Transportation, Rotimi Amaechi, that the probe be stalled in order not to incur the wrath of China, and therefore blocked further loans, is not only myopic but baseless.
Since all Chinese loans are tied to infrastructural developments, some of the African nations have had to forfeit their stakes in the infrastructure, which they used as collateral, after they defaulted.
From Sri Lanka, where China took over Hambantota port and more than 15,000 square feet of areas around on a 99-year lease after the country couldn’t pay back a $1.3bn loan it sourced from China to build the port, to the Mediterranean port of Piraeus which was acquired from cash-strapped Greece by a Chinese firm for $436 million are lessons Nigeria needs to learn from.
Similarly, Djibouti was straddled with numerous infrastructure projects including a new port, two new airports and the Ethiopia-Djibouti railway, on a scale-out of variance with the size of the economy of the cash-strapped country.
The country became trapped in a debt crisis and had no choice but to lease land to China for $20 million per year. China established its first overseas military base in the country, its first one overseas, just a few miles from a US naval base.
Several other countries, from Africa, Asia to Latin America, have been ensnared in a Chinese debt trap, forcing them to confront agonizing choices in order to stave off default. Kenya’s crushing debt to China now threatens to turn its busy port of Mombasa – the gateway to East Africa – into another Hambantota.
Also, Kenya may soon lose its largest and most lucrative port, Port of Mombasa to its creditor (China) after it defaulted in the refund. This could force Kenya to relinquish control of the port to China.
Nigeria owes China about $3.1 billion, more than 10% of the $27.6 billion external debt stock, tied to categories of capital projects, and Nigeria will still be servicing the Chinese loans till around 2038, which is the maturity date for the last loans obtained in 2018.
Some of the projects are: National Public Security Communication system Project of $399m and the Nigerian Railway Modernization Project (Idu- Kaduna section) of $500m obtained in December 2010 and are due to mature in September 2030.
Loans for the Abuja Light Rail Project of $500m and the Nigerian ICT Infrastructure Backbone Project of $100m obtained in November 2012 and January 2013 respectively. Both projects have also been fully disbursed at 100 per cent with an outstanding payment of $480m and $100m, respectively.
For the $500m Airport Terminal Expansion Project (Abuja, Kano, Lagos & Port Harcourt), the $984m Zungeru Hydroelectric Power Project, and the $325m Nigerian Parboiled Rice Processing Plants Project (Fed. Min. of Agric & Rural Dev), the maturity dates are 2034, 2033 and 2036, respectively.
In a recent interview, the Director of Centre for Infrastructure Policy Regulation and Advancement (CIPRA), Lagos Business School, Dr. Bongo Adi, explained that Nigeria lacks accountability, transparency, and responsibility to refund the loans.
According to him, Chinese Exim Bank has offered $6.6 billion to Nigeria and that is quite significant. He said: “We have to look at the total debt and the capacity to repay not just to China but to our creditors. Our Debt independent revenue is at 96% now. That means for every N1 we earn, 96 kobo is used to refund loans. That has passed a critical threshold.
“Out of 64 countries that host the Chinese Belt and Road initiative projects, 20 have gone under distress and 8 are about to lose their sovereign debt sustainability if they should take any further loan. If that were supposed to be a good guide, it means Nigeria needs to be very careful when we are borrowing from the Chinese.”
“We have seen this Chinese cycle and need to be careful. What normally happens is that the Chinese will begin to take over infrastructure assets, which is what some call Chinese Chopstick Imperialism and the experience is not just pleasant. Chinese strategically tie loans to infrastructure and that is with the intention of taking possession of the infrastructure asset if there is the default, as such asset became their collateral.”