The House of Representatives recently uncovered the immunity clause in the loans agreement that enabled Nigeria obtain loans to finance the rail projects and the $400 million loan for the Nigeria National Information and Communication Technology Infrastructure Backbone Phase II Project, from the Export-Import Bank of China, the immunity removal clause reads as follows “The borrower (Nigeria) hereby irrevocably waives any immunity on the grounds of sovereign or otherwise for itself or its property in connection with any arbitration proceeding pursuant to Article 8(5), thereof with the enforcement of any arbitral award pursuant thereto, except for the military assets and diplomatic assets. “According legal analyst what Nigeria has done in that clause is that if we were to breach the loan agreement and China the lender won the case in an arbitration, China will be able to enforce whatever arbitral award they win against any property of Nigeria except military or diplomatic assets
The questions we must ask ourselves are do we need the rail infrastructure; can we ever save to build such massive infrastructure across a vast country like Nigeria with land area of 92.3million hectares without taking a loan, do we have capacity to repay the loans and can China deliver the project to specification and on schedule.
Britain, our colonial masters built the rails connecting us before our independence in 1960. It is sad that 60 years after inclusive of 40 years of oil boom (1973-2015) we could neither modernise nor expand the inherited network significantly. It took 35 years for us to connect Ajaokuta to the sea by rail through the 276 km Itakpe -Warri railway in spite of its critical role in the viability of the Ajaokuta Steel development project. The outlier in our history of project delivery is the 186km Abuja-Kaduna rail which was started in 2013 and commissioned in 2016. That was possible because of Chinese loan. China Exim bank funded $500m out of the project cost of $874m.That was why it was delivered in three years as expected.
The on-going Lagos 27km Marina–Okokomaiko rail funded by the state government is a classic example of the plight of self-funded projects. The Lagos Mass Transit Line (Blue line) started in 2009 and will hopefully be completed in 2022. That’s 13 years. From hindsight, if a Chinese loan was available to Lagos state in 2009 the rail would have been delivered in 2012. It should have been in operations for eight years. The average time a Lagosian spends in commuting to work would have reduced significantly for a segment of the megacity. Substantial part of the loan would have been paid and I am sure other lines planned for execution like the Red line, and Green line would have taken off. Human suffering index in the city would have reduced significantly as commuting time is reduced.
Lagos case ought to have convinced our legislators that we do not have the fiscal discipline to save and invest in such a massive project. If it was impossible during the period crude oil was selling for between $70 and $100 per barrel, it is doubtful now that oil price is selling below $50 per barrel. None of our Western allies including Britain, our colonial master, will ever take the kind of risk China is taking on us. But we are not alone in this. Kenya got from China the loan to build its rail from the Indian Ocean port city of Mombasa to Nairobi the state capital (480km). The construction of the 485 km Standard Gauge rail at a cost of $3.6b started in 2014 and was completed in 2017. By 2019 the rail services led to two per cent drop in the country’s inflationary rate and led to 1.5 per cent growth in its GDP.
The rail project will break even in 2022 after five years of operations instead of the expected seven years. The rail has 30 freight trains and four passenger trains. A Chinese company is operating the rail for 10 years and will hand over to Kenyans in 2027. China is working to extend the rail to serve landlocked East African countries like Rwanda, Uganda, South Sudan and Burundi.
The modernisation of 759 km double track standard gauge Ethiopia-Djibouti railway owned in ratio 95:5 by the two countries was built between 2011 and 2016 by China at a cost of $4b. The Ethiopian section cost $3.4b, 70 per cent of which was funded by China Exim Bank and 30 per cent by Ethiopian government. China is to manage the operation of the railway for five years to enable local staff training.
Ghana in November 2019 signed a $2b loan deal with China for rail, road and bridge development in exchange for access to five per cent of Ghana’s bauxite reserves.
There is no basis for apprehension about the Chinese loans as long as it is used for provision of the critical infrastructure we need like yesterday. Our concern should be possibility of overpaying for the infrastructure, delivery at the specified quality and timely. China provides infrastructure across the globe and if our leaders are sincere, we must get value for our money. Developed economies such as America and Germany patronise Chinese goods but don’t compromise on quality. We certainly do not have any other option than to borrow to fast-track access to these infrastructures that will help transform our economy. It’s unfortunate that the entire sub-Saharan Africa needs those infrastructures to transform their flagging economies.
The focus of the National Assembly should not be on the waiver of the nation’s immunity clause which is an implied element of the terms and conditions of the concessionary credit facility. If the nation takes a loan to acquire an asset it cannot use sovereign immunity clause to prevent foreclosure in the event of default. No nation will lend to you clean or unsecured. That is why the clause has to be repudiated in the loan agreement. Collaterals to the borrower should not be material if the capacity and willingness to repay the loan when due is there.
According to the Debt Management Office, Nigeria has a debt stock of N28.63tn and only 34.89 per cent or N9.99bn is external debt. Our real challenge is our local debt of N18.64bn or 65.11 per cent of the debt stock. The rail projects are critical for diversification of our economy because of the imminence of low oil prices in the foreseeable future as global supply outstrips demand. An efficient rail transport system is a prerequisite for a vibrant domestic trade. Nothing illustrate this better than the study conducted by United States Agency for Development (USAID) in 2013 on the 1,225km Lagos-Kano-Jibiya (Niger Republic) transport route which is reputed to be the busiest but most inefficient transport corridor in West Africa. It is the major route for moving import and export commodities in and out of Nigeria and for movement of cargo within Nigeria which is estimated at 30m tonnes of goods per annum valued at $6billion.
The Chinese loans offers us unique opportunity to interlink the six geo-political zones through the three main network namely Lagos- Kano-Jibiya route, Lagos-Calabar route and Port Harcourt-Maiduguri route within the next five years .There is no project that prepares us more for Nigeria without oil than the rails because of its tremendous potential impact on agriculture, commerce and manufacturing .The 20-year loan with moratorium of seven years and interest at 2.5 per cent is concessionary.
In conclusion, rather than bother itself with the immunity clause waiver, the focus of the National Assembly should be on ensuring we did not overpay for each of the projects, we get value for all the projects, provide adequately for technology transfer and local content . We also need to reduce the cost of governance so that we can pay our local and external debts from our dwindling earnings especially from crude oil sales.
Agbola is ex-chairman, Lagos State branch, Chartered Institute of Bankers of Nigeria
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