The Federal Republic of Nigeria, Africa’s largest economy, is in crisis over the possibility of ‘losing’ its sovereignty to China over debts. The Federal lawmakers of the national assembly are demanding a probe into China’s lending practices into Nigeria, in a wake of a sovereign guarantee clause in loan agreements that they consider ‘an entrapment of Chinese neo-colonial plans’.
Lawmakers fear that the clause could cause Nigeria to sign away its sovereignty in the event of a payment default.
According to clauses in Article 8(1) of the Commercial Loan Agreement signed between Nigeria and the Export-Import Bank of China, Nigeria stands to concede her sovereignty to China should there be a default in the repayment of the $400 million for the Nigerian National Information and Communication Technology Infrastructure Backbone phase 2 project signed in 2018.
According to a West African Nations’ Management Office data, Chinese credit accounts for 80 per cent of all bilateral lending to Nigeria. It also provides loans to build railways, power plants and airports in Africa’s largest oil producer.
China’s stance as a willing partner for expensive infrastructural projects is an elaborate play to entrap African countries in debt. There is a popular belief that Beijing is present in Africa for the sake of China not as it claims to be there for Africans.
A lot of the current debt of most African countries is not going to be profitable to China and it is keen on helping Africa as these loans allow China to take control over certain projects once the credit conditions are not met by the borrowing county. China’s loans often include conditions that are strongly orientated towards Beijing’s strategic interests and increase the risk that many countries in the developing plunge into a monetary disaster.
This tactic is known as “debt-trap diplomacy” and has been used by China in numerous instances like Kenya and Ethiopia are struggling with Chinese debt.
For example, China had given a loan to develop a strategic port in Djibouti. In 2017, Djibouti’s debt was projected staggering at 88 per cent of its GDP, with China responsible for the bulk of this debt. Djibouti had fallen victim to China’s debt-trap and let China built its first overseas military base there.
Due to the coronavirus pandemic, Nigeria is staring at a grim economic condition with a lingering fear that its debt burden might escalate. Its primary revenue source, oil earnings, have long been undercut by falling production levels and dips in oil prices coupled with the recent total shutdown of the global oil economy. Over the past few years, Nigeria’s economy has been unable to fund national budgets fully. Consequently, it is desperate to look for more external funding.
So far, China has offered loans to back eleven ongoing large-scale infrastructural projects, leaving Nigeria’s debt to China at $3.1 billion as of March 31 against the total $5.575 loan agreements wrapped up with China EXIM Bank between 2010 and 2018.
Economists have been urging African governments to ensure that they read the small prints of the “conditionalities” defined by the Chinese. According to them, it would avoid Beijing laying claim to some of their assets, as they are doing in Madagascar, Kenya, Zambia and Zimbabwe.