The worst thing that can befall any nation is to default in its loan obligations to China. Some countries have bitter tales to tell for falling into china’s loan trap.
Tony Iwuoma
China has since emerged as the world’s latest superpower. It has taken on the world and growing in leaps and bounds and in some cases having the aces far and above hitherto undisputable leaders. It has rubbed shoulders with former world powers and come out unscathed such that its currency, Yuan, is now convertible international means of exchange. Virtually all goods in the world now have Chinese imprimatur for good or bad.
The country has ruffled feathers in international trade and diplomacy. In fact, China is winning new friends, especially in the African continent much to the chagrin of former lords of the manor, who are unease about what China’s real interests are.
In Nigeria today, the nation is agog with China’s multi billion dollar loan grants. Of course, this indicates burgeoning healthy relations between Nigeria and China, especially in the light of President Muhammadu Buhari’s recent visit to the far east Asian country. Moreover, the projects to which the loans are tied are key to Nigeria’s development quest.
READ ALSO: Chinese loans not debt trap – Buhari
However, Nigeria needs to tread with caution with the manner it is amassing debts. Former Minister of Environment and now United Nations Deputy Secretary-General, Amina Mohammed, had recently raised the alarm over Nigeria’s rising debt profile, an unenviable position from which former finance minister, Ngozi Okonjo-Iweala, had worked herself to the bone to free us. Coming from no less a personality than a former minister in this administration, it behoves the government to be circumspect in taking us back to Egypt, as we may never have another Joseph (Ngozi) to deliver us.
The Chinese are very shrewd with their money and this is understandable, considering the hard road they had travelled to get where they are today. That is why it is a bit confusing when foreign minister, Geoffrey Onyeama, reportedly claims that there is no document to be signed for the loan
Onyeama, according to news reports, revealed that $6 billion loan windfall secured by President Muhammadu Buhari during his recent state visit to Beijing, China, does not require any signing of document since it’s all project tied.
“It won’t need an agreement to be signed; it is just to identify the projects and we access it,” he was quoted as saying.
Buhari himself had disclosed the development in Beijing, at the Forum on China-Africa Cooperation, FOCAC, Round Table meeting, attended by African leaders and Chinese President Xi Jinping.
“These vital infrastructure projects synchronise perfectly with our economic recovery and growth plan,” he said.
Nonetheless, many fear that Chinese loan deals across Africa is neocolonialism and a ploy to keep the continent perpetually under. The loans appear innocuous enough but underneath is monstrous traps waiting to snap viciously at the very soul of defaulting nations.
To start with, there is little or no employment or business opportunities for the local populace, as China imports all equipment and materials, including even menial hands from home to execute the contracts.
Of course, one is happy to hear the president say the loans will be repaid as when due.
“Some of the debts incurred are self-liquidating. Our country is able to repay loans as and when due in keeping with our policy of fiscal prudence and sound housekeeping,” Buhari had assured FOCAC.
READ ALSO: Why 2018 FOCAC Summit is important to Nigeria – Chinese govt.
The problem, however, is that the president won’t be there to ensure that his promise is kept. He is already on his way out of office next year or in 2023, with no assurance that those coming after him share his enthusiasm about ‘prudence and sound housekeeping’.
The worst thing that can befall any nation is to default in its loan obligations to China and Nigeria must be wary. Already, some countries have bitter tales to tell for falling into china’s loan trap.
Last year, China took over a national asset from Greece for defaulting in its loan repayment, prompting European Union to take steps to forestall member countries from Chinese loans.
In Africa, Zimbabwe will soon handover a national asset to China for the same reason; just like Kenya may also be handing over its Lamu port, which was constructed by China on a $16 billion Chinese loan, alongside adjoining towns for 99 years after defaulting for three years.
We must not deny the fact that the loans, if well managed, are desirable if we must develop. It should not be loan to be spent on frivolities as we are wont or on nebulous projects that would be unaccountable.
That is why it seems superfluous that China, indeed, would not be insisting on signing documentary agreement. There is no way it can ask questions on how the fund will be spent or projects managed if there is no written agreement. How would they recover their money since the loan is not free?
It is not enough to say that because there is no cash transaction so the authorities should go and sleep. If a project is run aground due to insipid management or corruption. It’s as good as looting physical cash. Government must, therefore, ensure prudent management of the projects when completed. The projects must generate enough revenue to liquidate the loans that funded their establishment. Every loophole for revenue leakages must be blocked and every sticky finger chopped off, lest we regret ever going to China, which prays for opportunity to bare its iron fangs.