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Thoughts on Nigeria and Chinese Loans – Reuben Abati

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The relationship between Nigeria and China with regard to loans obtained from the latter to fund Nigeria’s infrastructural projects suddenly became a matter of legislative intervention and public scrutiny last week when the House of Representatives summoned the Minister of Transportation, the Minister of Finance, Budget and National Planning and the Minister of Communications and Digital Economy to appear before it on August 17. The Ministers are expected to explain certain clauses in the Agreement signed between Nigeria and the Export-Import Bank of China with regard to a loan of $400 million for the country’s National Information and Communication Technology (ICT) Infrastructure Backbone Phase II Project. The agreement was signed in September 2018 by the Federal Ministry of Finance on behalf of Nigeria (the borrower). Nigeria’s lawmakers have raised eyebrows about a clause therein which waives Nigeria’s sovereign immunity if it defaults in its repayment plan.

The contentious clause is Article 8(1) which provides inter alia 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 proceedings pursuant to Article 8(5) thereof with the enforcement of any arbitral award pursuant thereto, except for the military assets and diplomatic assets.” This has been interpreted to mean that Nigeria is in danger of losing its sovereignty to China.

The opposition People’s Democratic Party (PDP) has seized upon it to proclaim that it has been vindicated because it has always argued that the mission of the ruling party, the All Progressives Congress (APC) has always been to mortgage the future of Nigeria. PDP Presidential candidate in the 2019 General elections, Alhaji Atiku Abubakar, quickly added that Nigeria faces the risk of embracing the fate of Zambia with regard to Chinese loans. Groups and stakeholders in civil society, including lawyers and the Socio-Economic Rights and Accountability Group (SERAP) have asked that all agreements ever signed between Nigeria and China should be brought forward and subjected to close scrutiny, just in case any government official either out of ignorance or incompetence has committed Nigeria to a debt-trap, to the disadvantage of future generations.

From the government’s side, the only man who has spoken up is Rotimi Amaechi, the Minister of Transportation, but his explanations do not seem to address the issue. He says for example, that the waiver of immunity in the agreement is merely “a contract term”, a sovereign guarantee. Nobody is convinced. Amaechi and his colleagues who have been summoned by the House of Representatives would have to do much better than that. Nigerians no longer trust their government when it comes to international agreements. The quoted Article 5(1) in the said agreement with the Export and Import Bank of China rings too familiar and too topical in the light of recent revelations about the handling of Nigeria’s agreement with a certain Process & Industrial Development (P&ID). In that case, still on-going, a sum of $9.6 billion is still pending against Nigeria, just because some Nigerian officials signed an agreement that put the country into trouble.

Now, again, in the case of China, the aforementioned Article 8(1) refers to such words as “arbitration”, “property”, “enforcement of arbitral award”. These are the same key words in the P&ID case. Hence, additional questions need to be raised about the Chinese agreement: who signed the agreement? Was due diligence carried out? Was Nigeria thrown under the bus by the negotiators as has been alleged in the P&ID case? Ordinarily, a waiver of sovereign immunity does not mean that China will take over the running of Nigeria. Sovereign immunity is a principle in customary international law which simply means that a state cannot be pushed around by another state without its own consent to be so treated, in a foreign court. Hence, in every agreement that may go to arbitration, there is usually an agreement as to the place of arbitration and other details.

What exactly did Nigeria sign up to on September 5, 2018 with the China EXIM bank? To the extent that the Nigerian people have a right to know, I am convinced that the House of Representatives is in order to raise the questions before us.

To go further, the various stakeholders who have asked for a proper audit of all agreements with China are definitely aware of how the $6.6 Billion judgment against Nigeria which became $9.6 billion (because of accrued interest) in the P&ID case poses a serious risk to the country’s economic survival. They are also probably aware that there are similar cases relating to lack of due diligence in the signing of agreements that Nigeria is also grappling with. This includes the international arbitration in Paris with Sunrise Power and Transmission Company over the Mambilla Hydro Power Plant. Sunrise went to arbitration accusing the Nigerian government of breaching a 2003 agreement when it granted a separate contract to Chinese companies. The same Export-Import Bank of China was on the sidelines of that agreement. I understand the matter has been resolved but 17 years after the initial agreement, the country is yet to make any significant progress with the Mambilla Hydro which if things had progressed as scheduled would have emerged as the second largest hydro power plant in the whole of Africa. In this case, as in others, Nigeria remains behind because some characters failed to do the right thing. Similarly, the Ajaokuta Steel Company Limited which was meant to be a game-changer for Nigeria’s industrial growth process, was also held down for years by disagreements over agreements and a prolonged legal tussle between the Federal Government and a company called Global Infrastructure Nigeria Limited (GINL). Ajaokuta Steel is a living archetype of how all good intentions in Nigeria fail. In one word, legal tussles and arbitral disputes over contracts, obligations and commercial agreements have over the years, exposed the failure of public policy and the incompetence of state officials in Nigeria.

Minister Amaechi is concerned that if the same controversy is brought to the door-step of the Chinese, they may simply refuse to provide necessary loans for the Ibadan-Kano rail line. Amaechi appeals to the patriotic instincts of Nigerian lawmakers: he wants them to suspend all further enquiries until Nigeria gets an additional $5.3 billion from the Chinese. He means well no doubt, he wants Nigeria to get that Chinese money that Nigeria needs, but in his appeal lies the bigger question about Sino-Africa relations, and the place and conduct of African leaders within that matrix.

Amaechi is certainly an admirer of China’s romance with Africa. He begs his own country’s parliament to “mechionu” as Igbos would say, so Nigeria can get more Chinese money and sign more agreements. Someone needs to tell Rotimi Amaechi that Nigeria’s engagement with China cannot and should not be reduced to an Abiriba, Aba, or Alaba market transaction business model: “my brother, bring money make we do business, chop together.” But he is not alone. Many African leaders are like that and as they engage China, they fail to look at the sub-text.

In the 70s, China was far behind many African countries. I grew up in a country where any product that was made in China or Taiwan was derisively dismissed. China and Taiwan were the standard euphemisms for fakery, inferiority and cheapness. In those days, Nigerians talked about the British Standard (BS). Nigeria’s economy was doing well. The Naira was at par with the pounds sterling. Nigerians travelling to London on Fridays aboard Nigeria Airways, stopped by at Liverpool market and the Main street and spent money as if it was going out of business as a legal tender. This was the age of the oil boom. No Nigerian would touch anything Chinese. I grew up being told that anything Chinese or Taiwan does not last. Even when this COVID-19 break-out began, I heard some older Nigerians insisting that if indeed the virus originated from China, it would not last, because nothing that comes from China can be relied upon. Unfortunately, China pulled itself up by the boot-straps. China re-invented itself while other countries either went to sleep or became complacent. It is ironic that today, Nigeria adores China. In our class at the University of Maryland, College Park, 1996 -97, in an American Foreign Policy Process class taught by Hodding Carter III, in the Department of Government and Politics, we read a book titled “The Coming Conflict with China”. That conflict then was at best hypothetical. Today, it is a reality. China is one country that has leap-frogged into the future in an unimaginable manner. The emergent conflict between China and the Western world will be the most definitive factor of this century and the next to come. Africa and the developing world are both at the centre of that conflict.

With China thus on the ascendancy, its leaders defined for that country, broad geo-political ambitions. With the West in retreat and increasingly navel-gazing, protectionist and isolationist, China launched a muscular approach to foreign policy with its Belt and Road Way Initiative through which it sought to engage developing economies by way of financial support through loans and grants. The focus has been so far, infrastructural development but there is a lot more in there. Strategically, therefore, long before COVID-19, China tried to fill a vacuum that Western nations created. As Western creditors prescribed more and more stringent conditions for bilateral and multilateral loans, China offered cheap, easy and accessible alternative financing arrangements: interest-free government to government credits, and preferential loans from China EXIM and the China Development Bank. The latter, that is preferential loans, represents the bulk of China’s overseas lending. Developing countries were over-excited. They swooped on China’s offers like bees after nectar. Today, China is the world’s largest creditor to the developing world. Since 2008, China has been Africa’s main trading partner. There is even now in place, a Forum

Nobody saw the catch, and countries were caught flat-footed. China has been accused of debt-trap diplomacy. Many countries embraced that diplomacy with their hands tied behind their backs and today, their countries are in the throes of debt servitude. China gives but it takes! China helped Sri Lanka to build the port of Hambantota. Both countries signed an agreement, similar to the one Nigeria signed with the Export-Import Bank of China. Today, China runs that port with Chinese personnel. In Djibouti, the Chinese are in charge of the ports too, just because Djibouti borrowed money it could not pay back. In Zambia, for similar reasons, China is now controlling the Zambia National Broadcasting Corporation (in other words, China is in charge of mind control in Zambia). China is also planning to take over the Zambia National Electricity Company. Djibouti took loans from China to build a new port and two new airports, Unable to repay its loans, China has also taken over a part of Djibouti’s sovereign rights and possession of its new port, and has since set up in that country, its first military overseas base. There have been issues as well, with China’s relations with Kenya, Democratic Republic of Congo and other African countries.

But should we blame China?

Whatever travails developing countries may have gone through in the hands of China, in the form of damages to their sovereignty, we must all agree on certain basic points. One, “there is no free lunch”. China is not offering anyone a free lunch. Its cheap loans are tied to its own strategic interests in the world. African nations are the ones submitting themselves as pawns to China’s global strategic agenda. African leaders are most certainly complicit. Two, “when you borrow, you pay”. Chinese negotiators are often focused. If you don’t pay in cash, you will pay in kind. The Chinese only give out their loans even under the Belt and Road Initiative to countries that have something to offer in return. Many developing countries are so economically narrow and badly managed, they end up giving up national resources for borrowed funds that translate into debt servitude. Three, and this is the worst part, is that Chinese loans are often opaque. This is one of the reasons China is not a member of the Paris Club. It may have committed to the G-20 process on the moratorium for debt service re-payments for example, but China has stubbornly refused to participate in data calls. It is the biggest player in Africa’s infrastructure boom but it may never disclose the full details.

China’s influence in Africa even runs far deeper. In Nigeria, that influence has gone beyond loan agreements that touch on sovereign rights to an increasing ubiquity of Chinese presence in Nigerian lives. It is so real that the Chinese have now taken over a rather complicated business chain in the country from manufacturing to retail, including internet services, hospitality, car sales and ride hailing services. One of these days, we may wake up to see a Chinese roasting corn by the road-side in Nigeria, properly licensed to do so!

Nigerian lawmakers have a responsibility to shout out about Nigeria’s sovereignty, and the integrity of agreements with China or others. We certainly don’t want to hear that a certain Amaechi has signed off Nigeria’s Presidential Villa to the Chinese to get cheap loans to build a rail line to Port Harcourt! If that were to be the case, the Chinese will take over that Villa and like P&ID, look at us all in the face, talk about the sanctity of agreements, and dare Nigeria to go to the court of international arbitration. The onus is on Amaechi and co to tell us what we need to know. The Chinese knee is on our necks today, simply because our leaders have failed to lead us aright.

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NPA : Panel Clears Hadiza Bala Usman of Fraud

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Hadiza Bala Usman, the former managing director of the Nigerian Ports Authority (NPA), has been cleared of allegations of failing to remit N165 billion operating surplus to the coffers of the federal government, according to a report by TheCable.

However, the 11-member committee set up by the ministry of transportation to probe the alleged fraud decided to shift its attention to allegations of insubordination to Rotimi Amaechi, the minister.

She was accused of ignoring ministerial directives and communicating directly with President Muhammadu Buhari.

Usman was originally suspended in May 2021 by the minister over an allegedly missing N165 billion but the committee did not find any evidence in its account reconciliation.

TheCable understands that when Amaechi presented the report to Buhari and asked for permission to remove Usman based on to “insubordination”, the president refused to give approval but instead directed the minister to issue a query to the former NPA MD.

Amaechi, presidency sources told TheCable, said Usman had already defended herself before the committee, but Buhari insisted that she be allowed to respond to the report before any further action is taken.

“A visibly disappointed Amaechi then directed Magdalene Ajani, the permanent secretary, to issue the query,” the source said, adding that Buhari refused to be presented with a “fait accompli”.

Conspicuously missing in the 10 items of query is the original reason for her suspension — the allegation that N165 billion was not remitted to the treasure single account (TSA) which made the headlines.

QUERY AND REPLY

An official of the ministry of transportation, who spoke to TheCable but pleaded to be “shielded” for fear of victimisation, said Usman responded to the query within one week as stipulated.

“She said that she did not have access to some important documents because she was on suspension but I would say she did justice to the query,” the official said.

Mohammed Bello-Koko, who acted as NPA MD during her suspension, was a bank’s accounts officer to the Rivers states government when Amaechi was governor.

Bello-Koko was on Tuesday officially appointed the MD.

In the query dated January 26, 2022, Ajani said the committee accused Usman of the following acts of insubordination.

  • Disregard for ministerial directive in respect of the Bonny/Port Harcourt and Lagos port channel management contract
  • Unlawful procurement of the operation of truck transit park for port bound trucks (e-callup) with the non-payment into TSA
  • Unilateral execution of a supplemental agreement in respect of the Lekki Deep Seaport concession project
  • Breach of the channels of the communication in the public service
  • Unilateral and improper use of the emergency procurement mode to procure vehicles
  • Waiver, rebates and tariffs granted by NPA without requisite approval
  • disobedience of court order in respect of pilotage contract between NPA and Intels
  • Disregard of court order in the matter between NPA and BUA ports and terminal limited in respect of the concession of Terminal B Rivers ports complex.
  • Breach of presidential/ministerial directive in the matter of the LADOL/Samsung dispute
  • Lease of Koko Port to Messers Creek Shore Jetty and Terminal Ltd

In her response, she denied all the allegations.

On the renewal of the Bonny/Port Harcourt and Lagos port channel management contract for which she was said to have disregarded ministerial directive, she said she conveyed the directive to the Bureau for Public Procurement (BPP) which it clarified that it was an extension of an existing contract and such extensions do not require the attention of either the ministerial tenders board or the federal executive council.

Usman said, with regards to the operations of the e-callup system, that “it is practically impossible to have the e-Wallet account domiciled with the TSA as the amount standing to the credit of the transporters’ wallets still belong to the customers. In addition, the owners of the satellite parks and pre-gates used for gating trucks before their callup into the ports need to be paid weekly from the wallet account based on how many bookings were made for their parks”.

She denied unilaterally executing a supplemental agreement in respect of the Lekki Deep Seaport concession project, stating that it was operational in nature and does not alter any major aspect of the concession agreement “as it only rescheduled construction timeframe for a berth and allowed other players to partake in the development of dry bulk since the company was constrained to embark on the construction”.

The former NPA MD said presidency communicated directly with her seeking information and clarifications on the activities of the authority and she responded and she was not at any informed that her responses should have gone through the ministry since presidency did not communicate with her through the ministry.

Usman denied “unilateral and improper use of the emergency procurement” to procure vehicles to replace the ones burnt by the End SARS rioters, quoting public procurement laws to back her decision and pointing out that NPA got a provisional “no objection” certificate for the purchases.

She insisted that she did not disobey court orders on Intels and BUA, and that no presidential or ministerial directive was breached in the LADOL/Samsung dispute.

On the lease of Koko Port to Messrs Creek Shore Jetty and Terminal Ltd, she said she acted the legal limits of NPA as provided by the enabling laws.

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CBN Issues Guidelines to Reduce the Spate of Bad Loans Within the Banking Sector

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The Central Bank of Nigeria (CBN) has announced the issuance of a Global Standing Instruction (GSI) for checking the Incidence of bad loans within the banking sector.

The GSI is a policy that allows banks to debit the accounts of loan holders in other banks to settle defaults.

According to a statement by Chibuzo Efobi, for the Director, Financial Policy and Regulation Department of the apex bank, the initiative was conceived to address recurring instances of willful loan default in the industry.

Efobi said that the guidelines would enhance the establishment of a “watch list” and identify recalcitrant loan defaulters and enhance loan recovery from all eligible and funded accounts in the industry.

He added that it would also improve credit payment culture and reduce non-performing loans in the Nigerian banking system.

“Consequently, please be informed that the frequency of recovery attempts via the GSI platform has been amended from specific number to continuous and unrestricted number,’’ he said.

He said that the GSI automated loan recovery feature applicable to all loans in the industry shall remain perpetually in place throughout the life of the loan, or  until it is fully repaid.

He urged members of the banking public to check the CBN website, www.cbn.gov.ng for perusal of the guidelines.

The News Agency of Nigeria (NAN) reports that the GSI initiative was approved by the Bankers’ Committee at its meeting in February, 2020.

The CBN, thereafter, collaborated with relevant stakeholders to develop necessary protocols to facilitate implementation of the GSI, for eligible loans granted with effect from Aug. 28, 2019. (NAN)

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FIRS To Continue VAT Collection Until…says Malami

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The federal government has said that the Federal Inland Revenue Service (FIRS) will continue to collect Value Added Tax (VAT) following the ruling of the Court of Appeal on the matter.

The attorney general of the federation and minister of justice, Mr. Abubakar Malami, stated this in New York, United States while speaking on the disagreement over the collection of VAT between FIRS and the government of Rivers State.

Malami, according to NAN explained that the ruling of the Court of Appeal that FIRS and the Rivers State government maintain status quo, favoured FIRS.

He said it was FIRS that had been collecting the VAT before the dispute arose, over which the Rivers government approached the High Court.

“The position of not only the Federal Government but indeed the judiciary is the fact that status quo associated with the collecting of VAT should be maintained.

“And as far as the judicial system is concerned, the status quo as at the time the parties approached the court, it was the Federal Inland Revenue Service that was indeed collecting the value-added tax.

“So with that in mind, the Federal Government has succeeded in obtaining an order that establishes the sustenance of the status quo, which status quo is that the Federal Inland Revenue Service should continue collection.

“This is pending the determination of the cases that were instituted by states, particularly the Rivers State Government and the Lagos State government. The cases are being determined by the court.”

Recall that the government of Rivers State had urged the Supreme Court to set aside the September 10 ruling of the Court of Appeal ordering it and FIRS to maintain status quo on the issue of VAT collection.

A three-member panel of the Court of Appeal headed by Haruna Tsammani, issued the order being challenged at the Supreme Court by the Rivers government.

The state also urged the apex court to disband the panel of the appellate court, which gave the interim order and ordered another one to be constituted to hear the case.

“But one thing of interest is the fact that the federal government had indeed taken cognisance of the fact that where there exist a dispute between a state and federal government it is the Supreme Court that should naturally have the jurisdiction to determine the dispute between the state and the federation.

“And we are taking steps to consider the possibility of instituting an action before the Supreme Court for the purpose of having this matter determined once and for all,”  Malami said.

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