The 2019 budget is currently before the National Assembly for deliberation and approval. The Federal Government’s aggregate expenditure is put at N8.83 trillion. Overall budget deficit is put at N1.86 trillion (or 1.3 per cent of GDP), while capital expenditure is put at N2.031 trillion. As in the recent past, a good chunk of the external loan to finance infrastructure will come from China.
As at June 30, last year, the nation’s total local and foreign debt stock (Federal Government, FCT and states) stood at N22.38 trillion ($73.21 billion). Of this debt, the nation’s external debt stood at $22 billion, with the Federal Government incurring as much as $17.8 billion, while the states and the FCT owed $4.28 billion. The debts, if not checked, could swell up within a few years and become uncontrollable for the government. The consequences could also be dire for the country.
Experiences of other countries should also be helpful to the Federal Government at this point in time. For more than 10 years, China courted Venezuela with generous loans and financing arrangements to secure oil supplies for its resource- hungry economy and cultivate an anti-Washington ally in Latin America. Thus, it gave more than $50 billion in credit to Venezuela over 10 years. With the slump in the oil market, Venezuela’s receipt from oil shrank and it reneged in the payment of its loans to China. Consequently, China is now taking 28 per cent of Venezuela’s oil production to repay the debt.
China also built Zambia’s electric power station and the East African country could become Africa’s first casualty in China’s takeover after defaulting on loan repayment. Zambia is discussing with China for its takeover of Zambia’s electricity company, after defaulting on loan repayment. Thus, Zambia will lose its sovereignty to China following China’s seizure of its national assets for defaulting on the loans given to it by China.
Already, Zambia’s state-owned TV and radio news channel, ZNBC, is Chinese-owned. Chinese take-over of Zambia’s electricity company could lead to eventual Chinese effective ownership of the commanding heights of Zambia’s economy and potentially the biggest loss of national sovereignty since independence.
On their part, the International Monetary Fund, United States and many western countries are worrying that China’s Belt Road Initiative strategy is first to encourage indebtedness, and then to take over strategic national assets when debtors default on repayments.
Consequently, some prominent US senators have written a bipartisan letter to US Treasury Secretary Steve Mnuchin, urging the US to disallow the IMF from bailing out countries with financial difficulties following over-exposure to Chinese debt. The Senators named ‘predatory Chinese infrastructure financing’ as part of ‘debt-trap diplomacy’ which is fundamental to China’s BRI.
Recall too that early last year, the immediate past US Secretary of State, Mr. Rex Tillerson, told African governments eagerly seeking loans and Chinese investment to carefully consider the terms of those agreements to avoid forfeiting their countries’ sovereignty.
We, therefore, call for caution with all these enticements from China, as we want the Federal Government to note that Chinese investments do not bring significant job creation locally. Government should also remember that if it accepts a Chinese loan and reneges in repayment as and when due, Nigeria can, like Venezuela, Zambia, Kenya and Sri Lanka, lose control of its own infrastructure or resources through default.
While we agree that Nigeria currently requires huge capital outlay in her desire to position herself ahead of future challenges and opportunities, we urge the Federal Government to beware of “Chinese debt trap diplomacy” and carefully calculate the conditionalities of its investment and financial dealings with China.
We should not forget so soon Nigeria’s sad experience with foreign loans in the 1980s and the 1990s and the debt forgiveness we received thereafter should be a constant reminder that the country needs to build its economy without resorting to taking foreign loans surreptitiously laced with heavy and unpleasant consequences.
Without any iota of doubt, Nigeria is not only a bad manager of debt; it also lacks prudent management of such loans. We should, therefore, have it at the back of our mind that as it has happened in Venezuela, Zambia and elsewhere, in the event of default in paying the Chinese loans as and when due, the investments done with the loans, such as the new Lagos to Ibadan rail line, Mambilla hydro power station, the Abuja Airport and Port Harcourt facilities, could be taken over by the Chinese and Nigeria could lose its sovereignty over those assets.
We call on the Federal Government to critically analyse the total gains derivable from all the Chinese loans, contracts and investments currently being dangled before the country as well as the risks involved in the financial arrangements. This will enable us to put in place appropriate policies and instruments to mitigate against default, which could have an adverse effect on the economy. The Federal Government must check, henceforth, its propensity for foreign loans before the country enters another debt trap.
