Amaechi explains sovereignty clause in $500m Chinese loans

ROTIMI Amaechi, the Minister of Transportation has explained the sovereignty clause in the loan agreement between Nigeria and China.
Amaechi during a conversation on the African Independent Television (AIT) programme, stated that the clause ‘waiving sovereignty’ in the loan agreement between Nigeria and China was only a contract term, a sovereign guarantee that assures payback according to the terms and conditions of any loan.
“Now, when you say ‘I give you a sovereign guarantee and I waive that immunity clause, the immunity clause is that, if tomorrow I’m not able to pay you and you come to collect the items that we’ve agreed upon, that these are items I have put down as guarantee, I can waive my immunity and say no, you cannot touch our assets, we are a sovereign country (the Chinese) are saying, if you are not able to pay, don’t stop us from taking back those items that will help us recover our funds,” he explained.
He further said that it is a common practice to guarantee that a debtor would pay back and not necessarily because it has to do with China.
“It’s a standard clause, whether it’s with America you signed it or with Britain or any country, because they want to know they can recover their money. What the clause does is to say to you, I expect you to pay according to those terms and conditions. If you don’t pay, don’t waive your immunity on me (the lender) when I come to collect back what is the guarantee you put forward,” he said.
The minister further explained that the Chinese loans were not being paid to him nor the ministry but directly to the contractor that would execute the projects the loans were borrowed for.
“I told them at that meeting, that these loans are not given to us, they are paid directly to the contractor. Once we sign that the job has been done, they pay the contractor. And this has never been done before. So what is critical is that the projects are being done.
“The waiving of immunity simply means in trade parlance that I’m not giving you this loan free of charge. Just like if you go to take a loan from the bank, the moment you don’t pay, they go after the assets you put down. And people are politicising it.
Allaying the fear of some Nigerians asking if it’s possible to repay the loan, Amaechi stated that the loan was already being repaid.
“But we’re paying, he said, adding that, “tn the same National Assembly Committee sitting, they were told that out of the 500 million dollars, we’ve paid 96 million dollars already. Nigeria is already paying… So, it’s not that Nigeria doesn’t have the capacity to pay back.
“We’ll pay back. At 2.8 per cent, what other country would give you that loan? 2.8 per cent for 20 years with seven years moratorium, why can’t you pay back? The repayment plan is not done by us, it’s done by the Ministry of Finance, but they are meeting the requirements.”
The minister further explained that the loans were not paid to him nor the ministry, which automatically eliminates any fear of corruption or diversion of funds. They are paid directly to the contractor in China.
“I told them at that meeting, that these loans are not given to us, they are paid directly to the contractor. Once we sign that the job has been done, they pay the contractor. And this has never been done before. So what is critical is that the projects are being done.
“These loans are not paid here, so you can’t even steal it. What we do is ensure that the work is done. We hired an Italian company that goes with our engineers in the ministry to ensure that the Chinese meet the European standard, so that there are no fake things or poorly done work.
When they check and say yes, this has been done and done to the standard of the contract approved, then they pass it on to us, we sign and approve that the work has been done. It is then sent to the ministry of finance who also appends their signature and passes it on the Chinese Exim bank who then pays to the contractor. So how do you see the money?
“The job is development related. If you don’t do it, you don’t get paid. So the contractor would want to do the job, he wants to satisfy his client, so that the client can sign to say that he has done the job. So what is the problem. Is this political?
Amaechi, however, called on the National Assembly to put a hold on the probe as some loans were still being expected for the completion of Lagos to Ibadan and the construction of Ibadan to Kano and Port Harcourt to Maiduguri rail.
“There is an agreement for Abuja to Kaduna which was signed before we came, we signed the Lagos to Ibadan, we want to sign the Ibadan to Kano. Now we’ve also applied for them to give us a loan for Port Harcourt to Maiduguri which entails that when the loan is approved, we’ll construct the rail from Port Harcourt to Aba to Owerri to Umuahia to Enugu to Makurdi to Lafia to Jos to Bauchi to Gombe and then to Damaturu,” he said.
“So what should be primary to them is national interest, because we need to construct Lagos to Ibadan to be able to evacuate cargoes that come from Lagos to the hinterlands. So what they are doing now, may likely stop that. The same way, the government is under pressure to construct Port to Maiduguri which passes through the south Eastern States and the North Eastern states.”
“So if we go now and the Chinese say ‘we won’t give you the money because the arm of government that is supposed to approve this loan, which they have already approved are beginning to question the loan they have approved, we are not sure that we can recover the loan,’ then we can’t finish our projects.”