Why Nigeria took Chinese Loans – Amaechi


Nigeria’s Minister of Transport, Chibuike Amaechi, has said that the country went for Chinese loans because of their low interest rates and favourable repayment terms.


Amaechi also clarified on the controversial sovereignty clause in the loan documents, saying that the clause on ‘waiving sovereignty’ in the loan agreement between Nigeria and China was simply a contract term, that provides a sovereign guarantee loan repayment.


 Amaechi spoke on Friday in an interview on African Independent Television, and declared that should Nigeria going for loans, that would bring an end to the various infrastructural projects currently being executed by the Nigerian government.


Compared with loans from the Western countries, Amaechi said the Chinese loans are better, given their repayment period and moratorium.


“People are asking if Nigeria has the capacity to pay back the loans. We will pay back. A loan given for 20 years at 2.8 percent; which country will give you that? I mentioned that these loans are paid directly to the contractors, once we sign that the job has been done. What is critical is that the projects are in place.


“Compared to the loans we got from the Western countries, this is at 2.8 percent, for 20 years with seven years’ moratorium. Why won’t we pay back?”


The various loans taken by the Nigerian government to fund infrastructure development have become subjects of investigation by the National Assembly, where members have questioned the rationale behind the terms of the loans.


Specifically, the House of Representatives Committee on Treaties, Protocols and Agreements this week expressed worries over loan agreements being that the Nigerian government has signed with China. The committee has said it would review loan facilities that the country has already taken from China and other countries.


“I just thought that the National Assembly and Nigerians should at least acknowledge the fact that we are making progress in terms of infrastructural development.


He called on the National Assembly to suspend  the probe, pointing out that some loans  were yet to be received for the completion of Lagos to Ibadan rail line, and the construction of Ibadan-Kano, and Port Harcourt- Maiduguri rail.


“There is an agreement for Abuja to Kaduna (rail line) which was signed before we came, we signed the Lagos to Ibadan, we want to sign the Ibadan to Kano. Now we’ve also applied for them to give us a loan for Port Harcourt to Maiduguri which entails that when the loan is approved, we’ll construct the rail from Port Harcourt to Aba to Owerri to Umuahia to Enugu to Makurdi to Lafia to Jos to Bauchi to Gombe and then to Damaturu.


“The job is development related. If you don’t do it, you don’t get paid. So the contractor would want to do the job, he wants to satisfy his client, so that the client can sign to say that he has done the job. So what is the problem? Is this political?


“So what should be primary to them is national interest, because we need to construct Lagos to Ibadan to be able to evacuate cargoes that come from Lagos to the hinterlands. So what they are doing now, may likely stop that. The same way, the government is under pressure to construct Port to Maiduguri which passes through the south Eastern States and the North-Eastern states.


“So if we go now and the Chinese say ‘we won’t give you the money because the arm of government that is supposed to approve this loan, which they have already approved are beginning to question the loan they have approved, we are not sure that we can recover the loan,’ then we can’t finish our projects,” Amaechi said.


“When we stop collecting the loans, then we will stop developing because there is no money. Before we came, the money had been blown away. There were no funds,” Amaechi said.


On whether Nigeria would be able to repay the loans, the minister declared that the country is indeed repaying, and that he had told the National Assembly members so.


“But we’re paying, he said. “In the same National Assembly committee sitting, they were told that out of the 500 million dollars, we’ve paid 96 million dollars already. Nigeria is already paying… So, it’s not that Nigeria doesn’t have the capacity to pay back. We’ll pay back. At 2.8 percent, what other country would give you that loan? 2.8 per cent for 20 years with seven years’ moratorium, why can’t you pay back? The repayment plan is not done by us, it’s done by the Ministry of Finance, but they are meeting the requirements.”


He argued that if the previous governments had done the infrastructural projects, there would be no need taking such loans at such a time, adding,


 Amaechi assured Nigerians that the clauses on the loan agreements were not meant to work against the country’s interests.


“No country will sign away its sovereignty. The clause says ‘I expect you to pay according to the terms that we agreed on, but if you don’t pay, when I come to collect the assets you used as a guarantee, don’t wave your immunity at me and say you can’t touch our assets because we are a sovereign country.”


According to him, it is a standard clause in every such agreement, whether it is the United States or the United Kingdom that we are signing it with because they want to know if they can recover their money.


“What the clause does is to say ‘I expect you to pay according to those terms that we have agreed on, if you don’t pay, when I come to collect the assets you used as guarantee, don’t wave your immunity at me and say you can’t touch our assets because we are a sovereign country.”


“What you do is to give a sovereign guarantee, which is the clause generating reactions. And I’m ashamed by those interpreting it the other way,” he said.


Explaining further, Amaechi said: “It is a commercial agreement; it’s a trade agreement between Nigeria and China. The first issue is that Ministry of Transport does not take loan. Anything about the loan, talk to Ministry of Finance. What I signed is what they call commercial contract, that is contract between the federal government and CCECC as a contractor.


“The contract between Nigeria and China is usually signed by the Ministry of Finance on behalf of Nigeria, but that will be escaping the issue. Whether it is the Ministry of Finance that signed it or the Ministry of Transport, the issues are the issues. There is no contract without an agreement and that agreement must contain some terms and one of the terms that this one contains, is not that you’re signing away the sovereignty of the country. What you do is, you give a sovereign guarantee; and I’m ashamed of those who interpret it the wrong way.


“Now, when you say ‘I give you a sovereign guarantee and I waive that immunity clause, the immunity clause is that, if tomorrow I’m not able to pay you and you come to collect the items that we’ve agreed upon, that these are items I have put down as guarantee, I can waive my immunity and say no, you cannot touch our assets, we are a sovereign country. They (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. And it’s a standard clause, whether it’s with America you signed it or with Britain or any country because they want to know they can recover their money. What the clause does is to say to you, I expect you to pay according to those terms and conditions. If you don’t pay, don’t waive your immunity on me (the lender) when I come to collect back what is the guarantee you put forward.


He explained that the waiving of immunity simply means in trade parlance that ‘I’m not giving you this loan free of charge.’ According to him, it is just like when someone goes to take a loan from the bank. “The moment you don’t pay, they go after the assets you put down. And people are politicising it.”


The minister further explained that the loans were not paid to him nor the ministry, which automatically eliminates any fear of corruption or diversion of funds. They are paid directly to the contractor in China.


 “I told them at that meeting, that these loans are not given to us, they are paid directly to the contractor. Once we sign that the job has been done, they pay the contractor. And this has never been done before. So what is critical is that the projects are being done.


“These loans are not paid here, so you can’t even steal it. What we do is ensure that the work is done. We hired an Italian company that goes with our engineers in the ministry to ensure that the Chinese meet the European standard, so that there are no fake things or poorly done work. When they check and say yes, this has been done and done to the standard of the contract approved, then they pass it on to us, we sign and approve that the work has been done. It is then sent to the ministry of finance who also appends their signature and passes it on the Chinese Exim bank who then pays to the contractor. So how do you see the money?


He explained that the assets being pledged as collateral for the loans being collected, were the same assets that the loans are being used to fund, but stressed that Nigeria was already paying back the loans.