House of Representatives members, the Ministers of Transportation and Finance, Chibuike Ameachi and Zainab Ahmed have disagreed over the sovereignty clause embedded in the loan agreements between China and Nigeria
While the lawmakers said it was inimical to the security and development of the country, the ministers okayed the clauses, saying it was a universal standard practice.
The members were also at cross with Ameachi for agreeing to have a Chinese colony, Hong Kong as the arbitration centre on the loan agreements.
The developments played out at the resumed public hearing of the Committee on Loans, Treaties and Protocols of the House chaired Hon. Ossai Nicholas Ossai, currently reviewing loan agreements with especially China.
At the moment, there are about 17 different loans obtained from China to fund critical infrastructure in the areas of rail transportation, Information and Communication Technology, ICT, airport terminal expansion, energy, agriculture and water sector.
The loan clauses
The documents containing some of the loan agreements sighted by Vanguard correspondent made it mandatory for Nigeria to purchase the technologies, good and services with which to build the infrastructure from China.
Also, before the first tranche of loans otherwise referred to as first draw down can be secure, Nigeria is made to pay 15 percent of the contract sum in advance.
The Article 8.1 of the document read thus: “The Borrower hereby irrevocably waives any immunity on the grounds of sovereign or otherwise for itself or its property in connection with any arbitration proceeding pursuant of Article 8.5 hereby or with the enforcement of any arbitral way pursuant thereto, except for the military assets and diplomatic assets.
“8.3 This agreement as well as the rights and obligations of the parties hereunder shall be governed by and construed in accordance with the laws of China
“8.5. Any dispute arising out of or in connection with this agreement shall be resolved through friendly consultation. If no settlement can be reached through such consultation, such party shall have the right to submit such dispute to Hong Kong International Arbitration Centre for arbitration. The arbitration shall be conducted in accordance with the Hong Kong International Arbitration Centre’s arbitration rules in effect at the time of applying for arbitration. The arbitral award shall be final and binding upon parties. The arbitration shall take place in Hong Kong.
“The goods, technologies and services purchased by using the proceeds of facility shall be purchased from China preferentially”, the document read in article 2.
In another loan agreement, Nigerian National Public Security Communications System Project, the agreement added that “The technical standards to be used for implementation of the project shall be preferentially relevant Chinese Standards”.
The document also compelled Nigeria to pay 2.2 Interest rate 2.5%, annually; management fee of 0.25% (one off) to an aggregate amount of Five Million, Seven Hundred and Fifty Yuan and a commitment fee of 0.25%.
The agreement also featured another condition where Nigeria as the borrower would from time to time give update to Chinese authorities on the level of implementation of the relevant projects specified in the documents.
National to ensure due diligence
In his opening remarks, Ossai noted the issues, saying that it was the responsibility of the lawmakers to ensure that Nigerians were not shortchanged in the loan processes.
He said: “The National Assembly through this Committee will work to ensure that proper due diligence is taken by various MDAs before, during and after negotiations/signing of all bilateral loan and contractual agreements. We believe that both the Government and Nigerians appreciate the fact that bilateral loan agreements are not just about of infrastructural development but also a matter of national interest and national security; because the future of our children and unborn children are involved.
“As such, the efforts of this Committee to review the status of these agreements to ensure that it’s 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 agreements and recommend a more transparent and open process in accordance with our enabling laws and international best practices, should be seen by all stakeholders in the Nigerian project as a welcome development.
“Based on public statements and reporting alone, especially since our last meeting here, we have heard/seen comments and analysis on major television networks and national dailies by key actors, which have not accurately conveyed the severity of the issues and what the current structure of these
loans/contracts agreements may portend for our nation if not properly planned and managed well.
“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 loan/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 infrastructures. But rather to ensure full disclosure, transparency, accountability, utmost good faith, and value for money in both the bilateral loans and commercial contracts agreements entered into by the Nigerian government.
“The loan agreements we have seen so far, shows 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 agreements templates rather than go through the rigour of diligent technical review of negotiating specific clauses with clarity and for national interest. 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.”
Contracts signed in Yaun, governed by Chinese laws, Arbitration Centre in Hong Kong-Ossai
Ossai also revealed the loans were signed in Yuan currency and governed by Chinese laws.
He also expressed dissatisfaction with Hong Kong as the arbitration centre.
“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. We have also seen references made in the commercial contracts regarding BOQs but none of the commercial, contracts agreements submitted to us especially by Ministry of Transport has a single BOQ attachment.
“We have noticed from documents available to us that commercial contracts prices signed by Federal Ministry of Transport alone within this is over USD$33billion Dollars without any clear cut financing arrangements. Most of these commercial contracts agreements didn’t also have local content clauses and were witnessed by none 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 to serve Nigerians better.
“The Minister of Finance represented by the Permanent Secretary, and I showed him the documents, he was saying it was governed by the Nigeria law which is not true. I showed him. The documents are governed by the Chinese law. The arbitration centre is Hong Kong. Completely, it is not a neutral centre. It is governored by Chinese laws. Definitely is the contracts are governed by the Chinese laws and arbitration centre is in Hong Kong which is controlled by China, so the neutrality is not there and the international best practice is also not there. So, according to the circular issued in 2014 and 2018 that when negotiating Nigerian loans, you shouldn’t wave Nigerian immunity.
“And that clause is there and I also pointed to the Minister of Transportation that the commercial contract agreement he signed and also defined the wave under sovereign guarantee. I think the minister in that commercial contract defined sovereign guarantee. If you are talking about sovereign guarantee, you are defining particular issues, that there are no go areas. He defined it as CBN, NNPC and all what have you. But I believe in going forward, Nigeria should its immunity because it wants go take loan”, Ossai said.
Committee hearing in heated argument/Gbajabiamila’s intervention
Earlier, the hearing witnessed some storms in form of a heated argument between the Chairman and Ameachi and was subsequently forced into a 30-minutes break.
It had started on a friendly note featuring the interrogation of the Director-General, Debt Management Office, Mrs. Patience Oniha on detail of the loans and later progressed to the Minister of Finance, Zaniab Ahmed who was represented by Permanent Secretary, Special Duties, Aliyu Ahmed.
The proceedings later panned to the Minister of Transportation, Mr. Rotimi Chubuike Ameachi.
Questions put to him by the Chair of the committee on the local content components of the loan agreements were returned in monosyllabic answers without details.
However, Ameachi said that the activities of the lawmakers will hinder the acquisition of the loans to finance the south south rail projects.
He also stated that the only loan secured by the present government was the NI.6billion Lagos -Ibadan rail.
“We may not get that loan. We will lose that contract from Lagos to Calabar, because of the committee you have set up”, he said.
When Ossai said he was not talking about South South rail but Nigeria at large, Ameachi retorted “You have approached me on south south rail. Have you not? You have. Until you get the loan, there will be no contract. And there will be no loan.”
The tone of the conversation prompted a member of the Committee, Hon. Wole Oke to call the attention of the Chair for “guidance”, but the call was not heeded.
He was later to be given an opportunity to speak.
With the House getting more heated up, the Speaker Femi Gbajabiamila stormed into the Committee hearing and demanded for 10 to 15 minutes break.
“Can we, please have a 10 to 15 minute break?” Gbajabiamila pleaded and stormed out almost immediately.
In quick succession, the Chairman of the Committee formerly announced a 30 minutes break.
Vanguard can authoritatively report that before the commencement of the hearing at about 12:30pm, the Speaker had met privately with Ossai but it was not certain what transpired in the chairman’s office.
Clauses, a standard practice-Ministers
With the return of the Committee hearing after 30 minutes, the heat was turned on the Minister of Finance to answer to the issues.
On the issues of sovereignty clause, the representative of the Minister agreed that it was a standard practice.
“It is a standard clause in a number of commercial agreement worldwide. I am aware of the circular. In the event you have dispute, you can go to arbitration”, he said.
Not satisfied, the permanent secretary was asked to produce the Minister of Finance on Wednesday.
Also speaking on the issue, Ameachi said it was the standard practice when obtaining loans.
He said 80 percent of the loans were negotiated by previous government.
The minister added that local Contents were also factored in.
He however pleaded with the Committee not to chase the Chinese away with the issues.
“These are standard clauses you have before you can get the loan. These loans 80 percent were taken before we came. And they are standard clauses.
“Doors and windows made by China were rejected, we insisted that we can make our own here. Rods and other items can be sourced here.
“The one I signed which is commercial contracts, Lagos is the arbitration centre.
“When China hears whaat you say now, they won’t give us these loans. Once you sign, you are bound by the law. Let’s get funds to do our projects”, Ameachi said
He however promised to make available documents showing the detailed components of the local contents.
But in response, Ossai retorted “I disagree completely. They are no standard clauses. Well, that issue concerned national security. We can do that again. Our own is to interface adequately on the issues”.
Ministers such as Minister of Works and Housing, Babatunde Fashola, the Minister of Federal Capital Territory, FCT, Mohammed Bello, the Minister of Communication, Ali Pantami amongst others who were around to make presentations were asked to return tomorrow.