Nigeria: House - Transport Ministry Obtained Over U.S.$33 Billion Loan From China Without Financing Arrangement

(file photo).
17 August 2020

The House of Representatives has revealed that the Ministry of Transport alone has obtained over $33 billion loan from China for the construction of rail projects without any clear cut financing arrangements.

It also lamented that most of these commercial contract agreements didn't have local content clauses and more witnessed by non properly designated and authorized officials.

The Chairman of the House Committee on Treaties, Protocols and Agreements, Hon. Nicholas Ossai, disclosed this at the resumed hearing of the Committee on review of bilateral loan agreement and commercial contract agreements by MDAs on Monday.

He said: "We have noticed from documents available to us that commercial contracts prices signed by Federal Ministry of Transport alone within this is over $33 billion without any clear cut financing arrangements. Most of these commercial contract agreements didn't also have local content clauses and more witnessed by non properly designated and authorized officials.

"There are observable issues relating to procurement process, evidences of 15% advanced payments, payment of management fees, drawdown process and remittances and a whole lot of other matters, which we are strongly poised to ask questions on and hopes to get honest answers that will fine tune the current process, plan for possible renegotiation of some of these agreements in order serve Nigerians better."

Ossai stressed that the committee was not focusing only on Chinese loans, adding that from the record it has, Nigeria has over 500 bilateral loans and commercial contract agreements and investments treaties with different countries and institutions.

He added: "We have heard some people ask why we are focusing on only Chinese related loans and commercial contracts. We will like Nigerians to know that we aren't focusing on only Chinese loans. From what we know, Nigeria has over 500 bilateral loans and commercial contracts agreements and investments 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. Thus, it must be clearly noted that this is not targeted at only China, neither was it designed to impede the development of the railway sector and other infrastructure. But rather to ensure full disclosure, transparency, accountability, utmost good faith, and value for money in both the bilateral loans and commercial contract agreements entered into by the Nigerian government."

The chairman stated categorically that the loan agreements the committee had seen so far showed that govemment officials charged with the responsibility of representing Nigeria in these issues were 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."

Ossai said it was a common practice that most international loan agreements would adopt 'Sovereign guarantee' and a neutral international arbitration centre as opposed to waiving of the country's national sovereignty in an omnibus manner; especially in dealing with countries like China, known to possess an absolute state status on their institutions and corporations.

The committee said from its experience, the MDAs signed these commercial agreements in billions of dollars, then go to the President and Federal Executive Council for approval to execute, including securing loan facilities through Ministry of Finance and Debt Management Office (DMO) and then proceed to negotiate the terms of these loans before coming back to Mr. President who then writes the National Assembly asking for approval for billions of dollars to do projects without attaching the negotiated loan and commercial contract agreements details.

According to him, "This approach is the reason we have government representatives signing empty pages of loan agreements 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 Ministry of Communications and Digital Economy/Galaxy Backbone Limited."

He said the committee had an important role in drawing the attention of federal government to content issues minting in due process/ compliance with extant laws, transparency accountability, local content provisions, procurement process, disbursement schedules, Management/commitments fees issues and repayment mechanisms of the loans and commercial contracts agreements in line with its constitutional mandate.

Ossai noted that the National Assembly through this Committee would work to ensure that proper due diligence was taken by various MDAs before, during and after negotiations and signing of all bilateral loan and contractual agreement.

He stressed that both the government and Nigerians appreciate the fact that loan agreements are not just about Infrastructure development, but also a matter of national interest and national security.

Ossai said as such, the efforts of the committee to review the status of these agreements was to ensure that it was done with the best interest of the Nigerian people in focus, monitor the progress of its operation, management and administration by the relevant agencies of government in line with the terms of the aggrements and recommend a more transparent and open process in accordance with enabling laws and international best practices.

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