Olusegun Bamgbose, Esq., National Coordinator, Concerned Advocates for Good Governance, CAGG, has warned that Nigeria’s economy may crash or be grounded by 2026.
Bambgose was speaking about the sovereignty clause inserted in the agreement to secure $500m loan from China.
The loan agreement between Nigeria and China has indeed generated a lot of tensions and controversies.
However, Minister of Transportation, Chibuike Amaechi, had over the weekend, allayed the fears of the National Assembly and Nigerians, assuring that ‘no country will sign away its sovereignty’.
But Bamgbose, a senior lawyer who spoke from the standpoint of the law, said, “The Minister was partly right. It’s not contestable that the flow of capital to sovereign debtors, is exceptionally important to the world economy. Industrialized countries, no doubt, rely on loans to finance their budget deficits, while developing countries need it to develop.”
He, however, warned that the Federal Government should realize that sovereign finance is uniquely unforgiving of mistakes, adding that sovereign debts are ineradicable, meaning that “Nigeria should be wary of China loans. They are like Greek gifts.”
In a chat with DAILY POST on Monday, Bamgbose explained further, “Sovereign debt restructuring remains unpredictable and disorderly.
“The Minister was partly right because, in case of default to pay back the loan, China may not resort to use of military coercion or open intervention in the affairs of Nigeria, but may likely explore diplomatic suasion, backed by the threat of reduced or foreclosed access to further bilateral funding.
“However, the Federal Government should be wary of loans from China, the low interest rates, moratorium and good repayment plan, not withstanding.
“To foresee danger and not to warn, is the bane of old age, so said Nnamdi Azikiwe of blessed memory. There are some basic facts that lend weight to the fact that, Nigeria’s economy may crash or be grounded by 2026.
“One, Nigeria owes more money to China than any other country. Two, Chinese credit accounts for 80% of all bilateral lending to Nigeria. Three, Nigeria spent 50% of its revenue from oil on debt payment in 2018.
“Four, each Nigerian may be owing China about N20, 000, if we divide the money we are owing by the 198 million Nigerians.
“Five, Beijing is earning in both ways, most of the funds given out actually go back to them by way of supplies and construction contracts.
“Six, in 2019, Nigeria paid $138.8 million dollars ((N53.7b)to Exim Bank of China in debt servicing, the highest amount paid to any bilateral institution for one year.
“Nigeria owes China $3.2 billion. These scenarios are not economically healthy for our nation. Our economy is certainly heading for the rock, except something is done urgently.
“China may one day practically run the economy of Nigeria. This will certainly be an economic tragedy. We need to tactically and strategically review our foreign transaction with China or regret may be our portion soon.
“The debt freeze suggested by China may not be helpful. Many government officials are subtly benefiting personally from Chinese government.
“They are not bothered about the debt burden on the unborn generation. The one million dollar question is ‘Who pays the debt?
“It’s time for the Federal Government to look inward. Our economy is in serious danger of being grounded.”