By Ivoke Philip Ivoke
The scramble for Chinese loan by African leaders is assuming a frightening dimension.The whole idea of infrastructural loan finance is to improve the economy of the nation. It is an unproductive venture to invest in projects that doesn’t have favorable benefit-to-cost ratio, which will eventually lead to debt distress.
It appears that the Nigerian government preferred Chinese loan to loans from multilateral organisations such as world banks and International Monetary Funds due to its strict procedural requirements for accessing such loans
There is a current debate that the reason why China is giving out loans on liberal terms to countries with poor public accountability records and corruption is to actualize its debt-trap diplomacy, a ploy to take over the strategic assets of nations that fail to repay its debts, for the sole purpose of increasing its geopolitical influence
It is understandable that the dwindling oil resources have left Nigeria in a very precarious situation, but government must be wary of the structure of loans that it must take in order not to fall into the bobby traps which will mortgage the economic future of the country.
Every Nigerian should be worried of the current situation of mounting debts which saw the rising cost of Nigeria’s debt servicing reaching all time high in the first quarter of 2020. The infofmation obtained from Federal Ministry of Finance, Budget and National Planning showed that the Medium-Term Expenditure Framework and Fiscal Strategy (MTEF/FSP) recently released indicates that the total revenue accrued to the federal government of Nigeria in the first quarter of the year stood at a total sum of N950.56 billion while debt servicing stood at N943.12 billion. This is a horrific position for any country to be in, which means that Nigeria is spending 99 percent of its revenue on debt servicing. This is a bad economic atmosphere that requires urgent and innovative approach to reinvigorate and reverse the declining outlook of Nigerian economy. You don’t have to borrow when there is still massive wastages and leakages in the management of the nation resources. If this government is serious and committed in the economic emancipation of the nation, it should embarked on public sector procurement reform.This reform will help free resources that are lost due to corruption in the procurement chain. Applying loans to compromised procurement contracts is like a retiree using his pension benefits to play gamble. The consequences will be catastrophic.
Taking loan is not entirely bad, but any loan that must be taken should be properly scrutinised and interrogated by the National Assembly but that seems to be where we have a major problem due to complacency and divisive partisanship that have defined the attitude of our lawmakers in considering critical national policies. It is a sad commentary that the clause that ceded Nigerian sovereignty to china was never debated when the loan was approved by the lawmakers.
We must learn from what is happening in some countries where china is already demanding their pound of flesh due to their inability to pay back their debts. China has taken over Zambia Electricity Company ZELCO, Kenneth Kauda Airport and Zambia Broadcasting Cooperation due to their inability to pay back their debt. Sri Lanka reportedly ceded the port of Hambantota to China in December after it could not repay its loans for the development of the project. Other countries such as Djibouti are confronting a similar dilemma as its debt to China far outstrips its ability to pay it. Nigeria is so endowed with human and Natural resources to suffer such ignoble fate.
It is very sad to hear the minister of Transport, Mr Chibuike Amaechi discribe the clause in the loan agreement which cedes Nigerian sovereignty to China in the event of its failure to pay back as normal clause in loan transaction.
What Nigeria requires now is fiscal discipline in the management of its dwindling resources rather than plunging Nigeria into unsustainable debt that will worsen our situation.
Available statistics have shown that the liabilities from already applied loan by the previous government and this government is larger than the benefits they generate, which means the projects destroy economic value instead of generating it.
For Nigeria to get out of its current economic quagmire, it is important to ensure that for any loan to be taken, it must have the potential to enhance growth in the economy, improve productivity and must be sustainable.