2 August 2020

Amaechi: Without loans, there will be no development

Rotimi Amaechi, minister of transportation, says there will be no development of infrastructure if Nigeria stops taking loans.

Speaking on the controversy around loans from China, the minister said the Buhari administration had to rely on loans when it took off in 2015 because there was no money on ground.

A house of representatives panel had raised the alarm over clauses conceding Nigeria’s sovereignty to China in a loan agreement.

The clause, described as “lethal” by the panel, is in article 8(1) of the commercial loan agreement between Nigeria and Export-Import Bank of China.

Speaking at a programme on AIT, the minister said contracts signed with China do not cede the country’s sovereignty.

He said the clause is only a diplomatic agreement between both parties to ensure payment is made accordingly.

“Whether it is the ministry of finance that signed it or the ministry of transportation, the issue is that nobody will give you loan free of charge. There must be an agreement and such agreement must contain some terms. That doesn’t mean that you are signing away the sovereignty of the country; no country will sign out its sovereignty,” he said.

“What clause 8 does is to say to you, I expect you to pay according to those terms we have agreed. If you don’t pay, don’t throw your immunity on me when I come to collect back the guarantee that was put forward, that is all.”

The minister said clause is a standard feature in every agreement to ensure the lending country receives its money.

“When we stop collecting the loans, then we stop developing because there was no money when we came into government; by the time we came, the money had been blown away,” he said.

“What you do is, you give a sovereign guarantee and that guarantee is the immunity clause they are talking about. When we say I give you a sovereign guarantee and we get immunity clause, the immunity clause is that if tomorrow I am not able to pay you and you come to collect the items that we have agreed upon, these are items that I am putting down as guarantee. I can waive my immunity and say no you can’t touch it, I am a sovereign country.

“So, they are saying if you are not able to pay, don’t stop us from taking back those items that will make us recover our funds. Is China our father that will give us money for free? It is a standard clause in every agreement, whether it is America we signed it with, whether it is Britain, any country would want to know that they can recover their money.”

The minister had earlier said China will not approve Nigeria’s request for loans if the national assembly continues to probe the loan agreements the country has with lenders.

Comment:

These explanations are not adding up to me. Perhaps someone else can explain them better to me.

From Obasanjo’s first coming as a military head of state till Obasanjo’s second coming as a civilian president, Nigeria borrowed large sums from foreign lenders such as the World Bank, IMF, Paris Club, London Club ati be be lo… Nigeria defaulted on its debt and couldn’t pay back. Did IMF come to seize any assets? I don’t believe there is a provision in the western loan agreements for forfeiture of assets as the Minister is claiming.

Only China to my mind is known to have taken over assets in Zambia, Sri Lanka etc for loan default.

Nigeria is paying back our loans with oil not with revenues generated from the railway projects because the revenues can’t even cover the cost of running train services. We are already in the worst recession since independence and these people insist on borrowing more? Please someone should ask the Minister what we should do if the price of oil falls to $10 per barrel for just say 6 months. Hope he knows that Nigeria will not have the means to service its debts. 

We can borrow intelligently but not the way we are going about it right now and putting our children’s future at risk. 

Tanzania is borrowing intelligently for railway projects. Ethiopia too appears to have learnt its lesson. Egypt, Morocco and many others have taken loans for railways from elsewhere than China. Even our Kano-Maradi railway line is not being funded by China. So the Minister may be mistaken when he suggests his way is the only way. We can actually support credible private sector companies selected through a credible tender process to borrow. Others have done so. Dunno why we have difficulty in holding transparent and competitive tenders. Decent money shies away from anything that appears unwholesome.

The other unspoken issue is the cost of the Chinese railway projects. In Ethiopia, the govt is building a railway from Awash to Mekelle. Awash-Weldiya by Yapi Merkezi of Turkey at $3.8m/km while Weldiya-Mekelle by China Communications Construction Company at $6.2m/km. See the difference in cost? Instructively, CCCC had priced the Awash-Weldiya leg at $7m/km.

 In 2015, new Tanzanian President Magufuli cancelled $7.6bn worth of Chinese railway contracts to connect Dar es salaam to Kigali and Bujumbura. Those contracts are now being done by Yapi Merkezi of Turkey and Mota Engil of Portugal at a fraction of the Chinese contract sums. Funding is coming from Credit Suisse, Turkey Exim, Stanchart and others. 

It’s how you package yourself and your projects that attracts the funding! If your process isn’t credible, you will end up in shark infested waters!

In Nigeria in 2009, CCECC  rehabilitated the narrow gauge railway track and signals from Lagos to Jebba with N12bn ($80m) equiv. to $212,000 per km. Amaechi is now asking the same CCECC to rehabilitate track of Port Harcourt to Maiduguri narrow gauge with $1.8bn or $1.4m/km. That is nearly a 700% variance!!! 

The same Port Harcourt to Maiduguri that Goodluck Jonathan rehabilitated in 2012-2015 for N67bn ($446m) or $319,000/km and was allegedly mostly 85% complete when Buhari came in 2015! 

The same Port Harcourt – Maiduguri narrow gauge railway which had trains running from Port Harcourt to Kano and even as far as Gombe in 2015 when Buhari came?

 How on earth can we justify $1.4m/km on the same track so soon after the last rehabilitation?

Only Amaechi and the Chinese can explain the cost disparities.

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