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Chinese loan: Terms dangerous, say Reps as FG confirms sovereignty clause

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4 years ago

August 18, 2020

The House of Representatives on Monday faulted the sovereignty clause in Nigeria’s loan agreement with China, saying it was dangerous.

The Chairman of the House Committee on Treaties, Protocols and Agreements, Nicholas Ossai, who stated this in Abuja at the investigative hearing on external loans and commercial agreements, said Nigeria’s loan agreement with the Asian country was being governed by Chinese laws..

He said despite the fact that the Federal Government in 2014 signed an Executive Order providing guidelines on waiver of sovereign immunity during loan and commercial agreement negotiations, Nigerian officials had been violating the order.

Members of the executive, who appeared before the committee were the Minister of Transportation, Rotimi Amaechi; Minister of Works and Housing, Babatunde Fashola; Minister of Communications and Digital Economy, Ali Pantami; Minister of Police Affairs, Muhammad Maigari; and Minister of the Federal Capital Territory, Mohammed Bello.

Others included the Director-General, Debt Management Office, Patience Oniha; Permanent Secretary (Special Duties in the Ministry of Finance), Aliyu Ahmed and Director, Legal Services, Gabriel Christopher, both representing the Ministry of Finance, Budget and National Planning.

Ossai, in his opening address, stated that the controversial clauses and agreements had been existing before the Muhammadu Buhari-led regime. He also stated that the probe was not about the ruling All Progressives Congress or the Peoples Democratic Party.

He also said the lawmakers’ probe was not limited to Chinese loans and commercial contracts. Ossai stated, “We will like Nigerians to know that we are not focusing on only Chinese loans. From what we know, Nigeria has over 500 bilateral loan/commercial contract agreements and investment treaties with different countries and institutions. There is no way the committee will do a thorough job without segmenting the issues based on countries, institutions or MDAs.

“The loan agreements we have seen so far show that government officials charged with the responsibility of representing Nigeria in these issues are more desperate to just take the loans at any condition, possibly using non-negotiated loan agreement templates rather than go through the rigour of diligent technical review of negotiating specific clauses with clarity and for national interest.”

The committee chairman said it was a common practice that most international loan agreements would adopt ‘sovereign guarantee’ and a neutral international arbitration centre.

He said, “Even in situations where countries, out of desperation and weak economic position, waive their national sovereignty in bilateral or contractual agreements, the immunity of sovereignty waiver clause will usually be clear and categorically state specific assets associated with the loans for takeover in the event of default.

“However, the immunity clauses in most of these agreements before us are not only ambiguous, but also very obscure and without recourse to the fact that the Nigerian government had issued a circular on the subject matter with Reference Number SGF/OP/1/S.3/X/1739, dated 11th August, 2014, which is an Executive Order, that provides guidelines on issues of waiver of sovereign immunity clause during loan and commercial agreement negotiations.”

According to Ossai, arbitration centres for bilateral loan agreements are known to be generally in neutral places, “unlike what we have in most of the Nigeria/China agreements where Hong Kong that is also governed by China laws was designated as the arbitration centre.”

He explained that government agencies sign commercial agreements in billions of dollars before going to the Federal Executive Council for approval to execute them.

Ossai stated that they proceeded to negotiate the terms of the loans before coming back to the President, who would be asking the National Assembly for approval for billions of dollars to do projects without attaching the negotiated loan and commercial contract agreements details.

‘Nigerian officials signed empty pages of loan agreement’

He added, “This approach is the reason we have government representatives signing empty pages of loan agreement repayment schedule and other key documents required for the loan agreements to become effective.

“We have commercial contracts signed in US dollars, while the loan agreements for the execution of the same contracts were signed in Chinese Yuan currency in the Ministry of Communications and Digital Economy/Galaxy Backbone Limited.”

Ossai said the panel also noticed from documents that commercial contracts’ prices signed by the Federal Ministry of Transportation alone were over $33bn “without any clear cut financing arrangements.”

He added, “Most of these commercial contract agreements didn’t also have local content clauses and were witnessed by non-properly designated and authorised officials.”

The panel’s chairman also said there were issues relating to procurement process, evidences of 15 per cent advanced payments, payment of management fees, drawdown process and remittances “and a whole lot of other matters,” which the lawmakers are strongly poised to ask questions about.

‘DMO provided three out of 14 documents requested by lawmakers’

The panel chairman said the DMO DG, Oniha, failed to supply most of the documents requested from the DMO.

Ossai, while grilling the DMO boss, said only three of the 14 documents were provided to the committee, which Oniha denied.

The lawmaker, while asking the DMO boss various questions, said, “In Appendix 2 of your submission, we also noticed that Nigeria will continue to repay accumulated debt portfolio of over $8bn based on principal amount and interest payable from now till at least 19 years, based on the maturity of this loan. Appendix 3 in the contract agreement was also not attached.”

Answering various questions from the panel’s chairman, Oniha said, “What we have at the Debt Management Office is the loan agreement; that is what we work on. We submitted them earlier the first time you asked for the loan agreement.”

$326m loan on rice yet to be disbursed four years agreement signing

Ossai also said the loan on Nigeria’s parboil rice processing project under the Federal Ministry of Agriculture and Rural Development worth $326m had yet to be disbursed four years after signing the loan agreement.

The session became tensed when it was the turn of Amaechi. The minister was angered by Ossai’s frequent interjections.

Amaechi particularly faulted Ossai over his opening speech, asking that the lawmakers should show more patriotism.

The minister said, “In slight response to your speech earlier, I will repeat here that we need to be more patriotic than we are being.”

As Ossai interrupted him, the minister said, “Mr Chairman, I have the right to speak. You invited me, I was once a member of the House (of Assembly in Rivers State). If you say Ministry of Transportation has a contract $33bn, we want to see it, because as the Minister of Transportation, the only contract awarded so far is $1.6bn contract for Lagos-Ibadan, which is under threat.”

Ossai made another attempt to guide the minister into answering his question directly.

Amaechi, however, continued, “Mr Chairman, the implication of having a contract of $33bn is that I will have a large number of workers. There is no $33bn contract in Ministry of Transportation. What we have is the $1.6bn contract awarded under President Buhari and the $800m contract awarded by Goodluck Jonathan.”

Loans probe will expose PDP governments – Amaechi

The minister added, “There are over 20,000 workers and only 560 of them are Chinese. We need to begin to say the truth. It is good to tell Nigerians the truth. This is very political and we will show all the contracts awarded by the PDP government.”

Several members of the committee, who were miffed by Amaechi’s counter-attack, made attempts to speak but Ossai disallowed them. “Let the minister finish his speech and I will give you room to talk,” he told the lawmakers.

Ossai had been asking all the questions. He only allowed a member of the committee, Mr Wole Oke, to speak after a 15-minute war of words with the minister.

Ossai continued to grill Amaechi, asking the minister about compliance with Executive Order 003 of 2017 on local content in public procurement by the Federal Government.

At the 25th minute, the Speaker, Femi Gbajabiamila walked into the venue. That was around 1pm.

Shocked by the Speaker’s appearance, Ossai reluctantly left his seat for Gbajabimila. “Gentlemen, can we just take a break for about 10 to 15 minutes?” Gbajabiamila rose and left the venue.

Several members of the panel followed him, while Ossai announced that the break would last 30 minutes.

Ossai, who led members of the committee back into the venue at about 40 minutes later, called for the minister who had walked out of the venue during the break.

Unlike the combative exchange between Ossai and Amaechi, the lawmakers engaged the minister in the second session calmly.

When asked questions on a clause-waiving immunity in one of the contract agreements, Amaechi said the questions should be directed to the ministry of finance

Sovereignty clause truly exists, it’s standard practice, says finance ministry

Responding to Ossai’s question, the Permanent Secretary, who represented the finance minister, said, “Regarding the waiver of sovereign immunity, if you check most of the international commercial agreements these days, it is a standard clause in a number of international financial loans and commercial agreements worldwide.”

Commenting on the document Ossai showed him, the permanent secretary said, “I am aware. This is an arm of the World Bank, the International Centre for Settlement of Investment Disputes. This is in the event that you have an investment dispute with any of the contracting parties. You can go to arbitration.”

When asked if the judgment would be enforceable in Nigeria, the permanent secretary said, “Yes.”

Ossai said, “That means that the particular clause is dangerous. Now, you have a circular, agreed by the Federal Government to guide you in signing agreements. You disobeyed that circular issued by the President of the Federal Republic of Nigeria to guide you. But you were desperate enough to go and sign and waive the immunity clause of Nigeria. And you come on the pages of newspapers and tell Nigerians that, that is a standard. That is not a standard.”

Amaechi defends sovereignty clause, says Nigerians happy with projects

Responding, the minister said, “Why I am shaking my head is that if we listened to him (the PS) carefully – and we had that debate which included people like Femi Falana, Bolaji Akinyemi and others – that these are standard clauses which, if you don’t add them, you cannot have a loan.

“I will like to call the attention of the National Assembly to the fact that we have never refused to pay our loans. If we don’t take these loans to develop Nigeria…when I got to Lagos on Saturday to inspect Lagos-Ibadan (rail), the number of people jubilating may not like me; they may not care about me if I walked on the streets but they were jubilating because of the fact that they can take transport from Lagos to Ibadan.”

Speaking with our correspondent on the telephone later on Monday evening, Ossai said he described the clause as dangerous because the agreement with China were governed by Chinese laws and not Nigeria’s.

He said, “We are talking about the Lagos-Ibadan rail line project. He (PS) was talking about Nigerian law but I showed it to him. He didn’t even know what his people signed.”