Nigerians worry about the federal government’s scale of borrowing loans from China which can lead to another debt trap thus mortgaging the future of next generation
By Anayo Ezugwu
The decision of President Muhammadu Buhari to take additional loans from China for infrastructural development has continued to generate reactions across the country. While many economic experts are afraid that Nigeria and indeed Africa might be heading for another debt crisis with Chinese loans, the presidency has assured Nigerians that it has the capacity to repay the loans.
President Buhari had at 2018 Forum on China-Africa Cooperation, FOCAC, in Beijing, signed $328 million agreement with China, for the National and Communication Technology Infrastructure Backbone, NICTIB, Phase 11. He also announced that the country had gained from China with the execution of $5 billion worth of infrastructure projects in the last three years of his administration.
“These vital infrastructure projects synchronise perfectly with our Economic Recovery and Growth Plan, ERGP, and some of the debts are self-liquidating and our country is able to repay loans as and when due in keeping with our policy of fiscal prudence and sound housekeeping,” he said.
But experts are concerned that the rising public debt might push the country into a trap or potentially mortgaging the future of the nation. Austin Nweze, an economist, said Nigeria should not be excited about taking loans from China. He said the more China gives loans and build infrastructure in Africa, the more they empower their people. He stated that China would never create jobs for the country.
“I think what we should be doing is actually what china did. The question our leaders should be asking is how did China get to where they are today? The point is that the Chinese come with their labour so don’t expect them to create jobs for you. These loans would not empower local contractors or manufacturers.
“The only thing we could do is to ensure that at least 70 percent of materials that would be used for the projects should be sourced locally. From my personal investigations every material the Chinese are using for the ongoing projects in the country are imported. The government should also reduce the number of expatriates the Chinese are bringing in to work here because we have seen them doing the jobs Nigerians can do”.
According to Nweze, the government need to understand all these things and make sure that they insist that some of these issues would be in the agreement. “I’m happy that the minister of industry, trade and investment said that Nigeria is negotiating very well. So I expect that some of these details should be made public.
“The point is that Africa is not asserting herself on what we can do as a continent. If I’m the government, I would first of all do some in-housekeeping by bringing some Nigerians to set-up our national strategy on how can we compete globally. Without these, there is no way we can get favourable negotiation with China or any other country,” he said.
On her part, Oby Ezekwesili, former minister of education, said Chinese attitude to indebtedness is the hardest in the world. Reacting on her official Twitter handle @obyezeks, she said countries are best advised to avoid the riskiest debt types especially the Chinese genre – that has been happening across Africa in recent times.
“Chinese attitude to indebtedness is the hardest in the world. I know, because one had to deal with it in the course of my work at the World Bank, helping African countries to get the HIPC debt cancellation. It annoys me to no end to see our countries binging on Chinese Loans.
“Most annoying of this latest round of rising scale of public debt by countries of the continent is that the politicians are behaving exactly like the ones who piled up debts in the 80s and 90s. Just sign up for plenty loans…forget about imperatives of debt sustainability. The Chinese know exactly what they are doing. If you read their loan agreements with African countries, you will see how tight they cover their exposure. Meanwhile, our own Leaders go there to naively, gleefully and with huge dose of inferiority complex, sign on to bad deals,” she said.
Even Amina Mohammed, deputy secretary-general, United Nations and former minister of environment, also expressed worries over the rising level of debt in Nigeria and the rest of Africa. According to Mohammed, who served in the cabinet of President Buhari before she got the UN job, the country is now back to worrying levels of debt after the administration of former President Olusegun Obasanjo got Nigeria out of debt through Ngozi Okonjo-Iweala, erstwhile minister of finance.
At the International Monetary Fund, IMF, and the United Nations Working Together Conversation, Mohammed said the two organisations must have better conversation on the demands of a growing economy, seeking ways to make growth better and inclusive.
“Public resources are always going to be important, and so is ODA and the private sector. But I think we still haven’t yet got quite the solution and I hope that the work that we do together will open up that space to think more on how to leverage that. As I was coming up from New York, some of the concerns that came up from the meeting we had in China just recently and reports that we have, the debt issues are really big. I mean, having experienced what it was for Ngozi (Okonjo-Iweala) to get debt relief.
“It took her a few years to convince people, and we are now back again in my country, with a level of debt that is worrying. It’s happening all over. Africa, is that the way we want to go? I think we really need to sit down and have a better conversation about all the tasks of a growing economy that needs to be inclusive; it needs to succeed because stability is needed more than ever today across our countries and where we are working,” she said.
But the federal government has said that Nigerians have no reason to panic over Chinese loan. The government gave the assurance in a statement the Debt Management Office, DMO, issued on Tuesday, September 11, in Abuja. The DMO’s statement is in reaction to public concern following the announcement at the Forum on China-Africa Cooperation summit that Nigeria had signed a $500 million-loan facility with the China EximBank.
The DMO said that the loan would be used to finance road and rail transport, aviation, water, agriculture and power projects. It said the terms of the loan were appropriate for the country’s financing needs and aligned with her debt management strategy.
“The public should be assured that Nigeria’s public debt is being managed under statutory provisions and international best practices, and there is no risk of default on any loan, including the Chinese loans. Thus, the possibility of a takeover of assets by a lender does not exist.
“For the avoidance of doubt, government’s borrowings in the domestic and external markets, including Chinese loans, are all backed by the full faith and credit of government, rather than a pledge of government’s assets. Finally, borrowing from China should not be seen from a negative perspective as they are being used to finance Nigeria’s infrastructural development at concessional terms,” DMO said.
It is hoped that Nigeria uses the loans judiciously.
– Sept. 14, 2018 @ 15:57 GMT |