Revealed: 5 conditions accepted by Nigerian govt before taking $4.7bn Chinese loan

THE Nigerian government accepted some pre-conditions before taking Chinese loans estimated at nearly $4.7 billion loan as at June 30, 2023, Economy Post has found.

Nigeria’s loans from China grew from $1.39 billion in June 2020 to $4.73 billion in the corresponding period of 2023, according to the Debt Management Office (DMO), representing a 240 percent increase over the 8-year period.

This implies that under former President Muhammadu Buhari, Nigeria took $3.34 billion Chinese loan to build infrastructures and other projects.

READ ALSO: Kaduna-based steel agency fails to justify N12bn allocation by Buhari govt

However, the Nigerian governments under Mr Buhari and his predecessors accepted some conditionalities from China before taking the loans.

Nigeria’s former Finance Minister, Ms Zainab Ahmed

The conditions are, however, not different from those given to other countries such as Ethiopia, Bolivia, Tanzania, Republic of Congo, Mozambique, among others, an international loan negotiator told Economy Post.

First condition: One-China

The first condition, according to the negotiator who does not want his name in print due to his position, is the acceptance of the One-China Principle. The principle says that there is but one China in the world, for which Taiwan is an inalienable part of.

The principle further says that “the government of the People’s Republic of China is the sole legal government representing the whole of China.”

Under President Olusegun Obasanjo, there was a strong commitment to the One-China Principle, as can be seen here, and his successors – Mr Musa YarAdua and Dr Goodluck Jonathan- continued on that line.

READ ALSO: Exclusive: Fubara eyes ‘Obaseki strategy’ for 27 lawmakers as Rivers economy struggles

On January 13, 2010, one month before becoming acting president, Dr Jonathan said, “Nigeria firmly adheres to the one-China policy and will not change this position under any circumstances.”

On January 11, 2027, former President Muhammadu Buhari pledged loyalty to the One-China Principle and other agreements signed with China.

Lagos-Ibadan railway Source: Punch

“This administration is very serious about infrastructural development. We want rail, road, power, skill acquisition for our people. We ought to have developed beyond this point, but we neglected infrastructure when we had the resources.

‘Now, we have to collaborate with you, and we will keep our side of the bargain in all the agreements we have signed,” President Buhari said, as reported by Premium Times.

Second condition: Chinese labour/companies

Apart from the One-China Principle, Nigeria also pledged to use Chinese labour where available. Economy Post was told that the agreement borders on using more of Chinese labour and less of the debtor country’s manpower (Nigeria, in this case).

This explains why the Chinese labour dominates the management of most of Nigeria’s railway projects across Nigeria’s North and South. While Nigerians are mainly labourers, Chinese experts are the real brains behind the projects.

More so, it is part of the agreement that Chinese companies must be used to execute those contracts. For instance, China Civil and Engineering Construction Company (CCECC) built Kaduna-Abuja railway. The company is also in charge of Lagos-Kano and Lagos-Ibadan railway projects.

“You will rarely be allowed to use indigenous companies to execute contracts funded by China. This is a policy direction by the government meant to support Chinese citizens and companies,” the expert said.

READ ALSO: Ajaokuta: Buhari approved N33bn for dormant steel company, $500m compensation, millions in export grant

A 2022 Fitch report said that CCECC had dominated the railway construction sector in Nigeria, supported by Chinese financing.

Third condition: Non-disclosure

Another condition accepted by the Nigerian government before taking Chinese loans is the principle of non-disclosure of terms of contracts. The expert said China often took this seriously in order not to attract uprising or resistance from debtor countries’ citizens.

In 2020, Minister of Transport, Mr Chibuike Amaechi, was asked to disclose the terms of the agreement when he was seeking a $500 million loan from the Asian nation. Mr Amaechi was forced to reveal the “sovereignty” side of the agreement after much public condemnation.

However, other terms of the agreement were not disclosed by the minister.

Fourth condition: Dependence

The Carnegie Endowment for International Peace says, “Funding from Chinese banks allows China or Chinese enterprises to have leverage over the recipient nation, and to demand further requirements outside the aid and loan agreements.”

This is true of Nigeria which has also accepted to cooperate with China in other sectors of the economy, including culture, energy, manufacturing, among others.

Nigeria’s free trade zone in Lagos is dominated by Chinese companies that are producing and exporting while enjoying several incentives and rebates.

On October 27, 2023, the Nigerian government signed a $463m power distribution contract with a Chinese consortium. The contract will be financed by the China Exim Bank, according to Punch.

Fifth condition: Waive of Sovereignty

Nigeria also waived its sovereignty to China before taking the country’s loans. By this, China can take over an airport, a seaport, an oil block or any other item in the agreement.

Mr Chibuike Amaechi, Nigeria’s former Transport Minister

Nigeria therefore will not enforce its sovereignty if it defaults in loan repayment. Mr Amaechi explained this in 2020:

“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 as guarantee, I can use my immunity and say no, you cannot touch our assets, we are a sovereign country. Is China our father that will give us money for free? The Chinese are saying, if you are not able to pay, don’t stop us from taking back those items that will help us recover our funds.”

China will take over a Nigerian asset for a period of time if the country fails to repay loans. Sri Lanka is a recent example.

According to the Christian Science Monitor, “China loaned Sri Lanka $1.26 billion to finance the Hambantota port from 2007 to 2014. As Sri Lanka’s debts mounted, China’s state-run firm China Merchants Port Holdings took over management of the port under a 99-year lease for $1.12 billion, which Sri Lanka used to strengthen its foreign reserves.”

African countries are heavily indebted to China

Several African countries are heavily indebted to China. Ghana is the topmost, with $31.1 billion loan from China, according to Visual Capitalist, which obtained the report from the 2023 US-China Economic and Security Review Commission.

Guinea is indebted to China to the tine of $21.9 billion, while Ethiopia owes $14.8 billion. Tanzania owes $12.6 billion, while Mozanbique is indebted to the tune of $7.9 billion. Nigeria fares better at $4.7 billion but countries like Chad ($3.2 billion), Senegal ($3.1 billion), Mali ($2.6 billion) and Cameroon ($1,8 billion) have lower debts than Africa’s most populous nation.

Is China a predator?

The West thinks that China is a predator. The 2023 US-China Economic and Security Review Commission report said that 60 percent of countries that were indebted to China were in financial crisis in 2022.

The West believes that China provides loans to nations that would not be able to repay. Some experts in Nigeria toe the same line, saying that loans from China are not as straightforward as they seem.

“China prefers that contracts for loans are written in their own language so that should there be any problem, they will interpret the contract they way it suits them,” said a lecturer at Covenant University, Prof Jonathan Aremu, who is an international economist.

“Loans are divided into deadweight and productive loans. Deadweight loans are for consumption, but productive loans are used to generate additional assets. Many African nations have deadweight loans and do not have good trade negotiators.

“Also, they fail to do their feasibility studies before taking loans. They discover policy lapses in their loans which they never envisaged. The solution is to get good trade negotiators and ensure they do their due diligence and take productive loans.”

For Chief Executive Office for Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, the problem lay with corrupt African countries, not China.

“Many African countries are corrupt. They inflate contracts and sometimes fail to embark on new ones upon which they obtained loans. If you fail to utilise the loan you took from China, it is not China’s fault,” Dr Yusuf argued.

+ posts


Please enter your comment!
Please enter your name here


The Ultimate Managed Hosting Platform
Load WooCommerce Stores in 249ms!

More like this