FG Signed Multi-Billion Loans Deal Before Negotiating Terms — Reps


There were fireworks between the Minister of Transport, Chibuike Rotimi Amaechi, and members of the House of Representatives Committee on Treaties, Protocols and Agreements on Monday, over contractual agreements between the Chinese and Nigerian governments on some ongoing projects.

The minister had appeared alongside the Director General, Debt Management Office (DMO) and officials of the Ministry of Finance, before the Ossai Nicholas Ossai (PDP, Delta) led committee to explain their roles in the signing and implementation of the terms of agreements and contracts.

The House of Representatives committee alleged that the Nigerian government officials signed empty repayment loan documents for the development of the Nigeria rail sector even before the terms of the loans were negotiated.

Chairman of the committee, Ossai said the lower legislative chamber equally discovered that the Ministry of Transportation signed a commercial contract worth $33 billion without any clear cut financial arrangement while most of the contracts’ agreements did not have local content clauses.

But the Minister of Transportation, Rotimi Amaechi, said there was no such contract existing in the ministry as the only contract was the $1.6 billion loan for the Lagos/Ibadan rail project signed by the Buhari government and the about $800 million loan signed by the Jonathan government.

The minister described the probe as politically motivated. There was also disagreement among members of the committee on how to go about the exercise.

It took the intervention of the Speaker, Femi Gbajabiamila, for the exercise to continue.

Amaechi then challenged the committee to furnish his ministry with details of the contract to enable them make the necessary response.

Alleging that public officials’ were only desperate to obtain the loan without proper scrutiny of the agreements, Ossai frowned at the misconceptions and misgivings on the on-going legislative scrutiny of various agreements.

“We have also noted comments on the facts that the National Assembly approved these loans, so why turn around to probe it now? Well, I remember stating in our last meeting here, that executive scrutiny and oversight by the legislature on government policies, programmes, and projects can be done at the beginning, during implementation and at the end of implementation.

“From our experience, the MDAs sign 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 the 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 contracts’ agreements details.

“This approach is the reason we have government representatives signing empty pages of loan agreements repayment schedules 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.

“We have also seen references made in the commercial contracts regarding BOQs but none of the commercial contracts agreements submitted to us especially by the Ministry of Transport has a single BOQ attachment.”

According to him, the House noticed from available documents that the commercial contracts process signed by the Federal Ministry of Transport alone is over $33 billion without any clear cut financing arrangements, adding that these commercial contracts’ agreements didn’t also have local content clauses and were witnessed by none properly designated and authorised officials.

“There are observable issues relating to the procurement process, evidence 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 hope to get honest answers that will fine tune the current process,” he said.

The committee chairman also raised concern on the sovereignty clause in the loans agreement to which the representative of the Ministry of Finance said the clause was the standard practice, which allows for arbitration in case of default.

Contract details

Speaking on some of the contracts and the clause on local content, Amaechi disclosed that out of the $1.6 billion Lagos-Ibadan Railway Line contract, China is providing $1.2 billion while the Nigerian government will commit $400 million.

“In a slight response to your speech earlier, I will repeat here that we need to be more patriotic than we are being. Mr Chairman, I have the right to speak, you invited me. I was once a member of the House. If you say the ministry of transport has a contract of $33 billion, we want to see it because as the Minister of Transport, the only contract awarded so far is $1.6 billion for Lagos-Ibadan, which is under threat.

“By the time we came, the contract awarded by  former President Jonathan, signed by Aganga had been completed 80%, so we didn’t have to do the meeting of local content or no local content. The only one that has to do with the issue of local content is the $1.6 billion contract that was awarded for Lagos to Ibadan, for which the Chinese government is providing $1.2 billion and we’re providing the remaining $400 million,” he said.

The minister further stated that many projects including the Lagos-Calabar coastal rail may be jeopardised by the lawmakers’ position on the Chinese loans.

According to the minister, the Chinese, as part of the agreement, were building two training institutions; one in Lagos and the other at the University of Transportation in Daura, Katsina State.

He added that as part of the local content agreement, over 150 Nigerians were being trained in China on various engineering aspects while out of the thousands of people employed on the projects, only a little over 500 are Chinese nationals.

“You asked about training, there are over 150 Nigerians in China, being trained as engineers. We will provide the document to you by Tuesday (today). They have built two training institutions in Idu and Daura. We provided you with the list of the total number of Chinese workers on that project,” he added.

However, the committee insisted that the minister should provide the list of Nigerians engaged as workers and contractors to ascertain the level of compliance with local content clauses.

DMO speaks

Earlier, chairman of the committee asked the Director General of the Debt Management Office (DMO) Patience Oniha, about Nigeria’s debts saying “In appendix 2 of your submission we also noticed that Nigeria will continue to repay accumulated debt portfolio of over  $8 billion based on principal amount and interest payable from now till at least the 19 years based on the maturity of this loan. Appendix 3 in the contract agreement was not attached”.

The DG, DMO, said what they had at the Debt Management Office was the loan agreement which they worked on and submitted to the committee.

On the request on why the $326 million Nigeria Parboiled Rice Processing Project loan signed between the Federal Ministry of Agriculture and Rural Development was yet to be disbursed four years after signing the agreement, the DMO DG said, “we included in our response that the ministry of finance will provide that, so the DMO can’t respond to that question now. For the disbursement, there’s a process for the multilateral and bilateral loans”.

“We only have what’s in the loan agreement. The DMO does not manage the projects in terms of who implements and when it’s ready for implementation”.

‘Sovereignty clause standard practice in loans agreement’

The Permanent Secretary on Special Duties, Ministry of Finance, Aliyu Ahmed, who spoke on the sovereignty clause in the loan agreements informed the committee that the clause is the standard practice, which allows for arbitration in case of default.

However, the chairman of the committee faulted the response, saying the ministry should furnish the committee with the details of the clauses contained in the agreements.

“For instance it’s a common practice that most international loan agreements would adopt ‘Sovereign guarantee’ and a neutral international arbitration centre as opposed to waiving of our 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,’’ he said.

The chairman maintained that the clause raised a lot of concern among Nigerians.

It would be recalled that the minister had at an earlier sitting of the committee cautioned that Nigeria risks losing the Chinese loans owing to the investigation being carried out by the National Assembly.

Amaechi noted that the scrutiny the loans agreements were being subjected to may cause the Chinese government to halt the loans which he said would affect many key ongoing projects across the country.


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