A wise man once said, “The thing that hath been, it is that which shall be; and that which is done is that which shall be done: and there is no new thing under the sun.” The great philosopher and thinker, Cicero provided a similar statement that should serve as a lesson: “History is the teacher of life” (magistra vitae). These two expressions presume that we have a better understanding of life when we look into history because many times history always has a way of repeating itself, sometimes in different colourations. Hence, George Santayana said, “Those who do not learn history are doomed to repeat it.” Or put differently, “Those who cannot remember the past are condemned to repeat it.”
Nigeria and the entire African continent are in a pathetic race to repeat history. African countries have been through diverse periods of isms, from colonialism to imperialism and post colonialism. Many African countries that held huge prospect at independence have become disappointingly backward. Many of the least developed and developing nations under the United Nations classification are domiciled in Africa. Ninety per cent of the Heavily Indebted Poor Countries (HIPCs) in the world are located in Africa. Many of these nations have remained poor and undeveloped owing to a combination of corruption and huge debt burden that has enslaved them to rich or developed nations.
Nigeria was a nation with much prospect at independence until the nation discovered crude oil and abandoned developmental efforts, squandering the unexpected rainfall of oil income. But our debt history did not begin with the fall in oil prices in the 80s. Nigeria’s debt started from the colonial era and long before the country gained independence. The country’s loan history has been traced to the 1920s when the first loan of £5,700,000 at an interest rate of 2½% payable over a period of 20 years was obtained from the United Kingdom. Subsequent loans were mostly obtained from the United Kingdom capital market and from the International Bank for Reconstruction and Development (IBRD). Essentially, whilst the British colonialists were advancing their economic interest in Nigeria, it was done at the expense of the future generation. However, the nation’s debt burden was still manageable until Nigeria became prodigal in its borrowing and spending after independence. The debt bequeathed to the new independent nation gradually grew as a result of the short-sightedness of leaders to the point that by 2005, the country’s debt burden had risen to of $35.994 billion whilst total revenue was less than $9 billion.
Nigeria’s external Debt-to-GDP ratio was about 1.9% at independence but increased to more than 70% by 1990. Nigeria was arguably one of the most heavily indebted nations at the time. The nation’s debt burden was largely worsened by the sharp drop in oil prices in 1980s and 1990s, which incapacitated the country from servicing existing debts. The situation was further compounded by the profligacy of the successive military administrations and their ill-advised economic policies. It is more depressing that the money borrowed by the different administrations were mostly misappropriated and in some cases, completely embezzled. Events have shown that significant slice of embezzled funds were repatriated abroad to develop other economies whilst the Nigeria nation is pauperised. Government officials that embezzled public funds either bought properties abroad or simply stashed the illicit funds in some foreign accounts. In essence, our leaders borrowed huge funds at the expense of the future generation, embezzled the funds and returned them to our creditors through property acquisition and savings in foreign accounts. Our creditors in return use the funds to develop their economies, yet our nation kept accruing interest on the loans. Funds stolen by the Abacha junta are still being returned to the country in tranches. It is only natural that huge interest would have been made from the money even if the receiving banks only lend to businessmen.
This was our reality until the Obasanjo administration led by the former Minister of Finance, Dr.NgoziOkonjoIweala pushed for a debt relief from the London and Paris Clubs, which was implemented in 2006. This debt relief pulled Nigeria out of the inglorious list of heavily indebted nations. Nigeria was released from the slavery of debt by the London and Paris Clubs, but we soon found another worthy master in the Chinese just like other unobservant African nations. Nigeria is gradually walking into another debt trap and subjecting the future generation to an unthinkable round of imperialism through underhand infrastructure. To make things easy for naïve countries the Chinese government launched the “One Belt, One Road” initiative designed to increase the nation’s influence strategically through more than $1 trillion investment in infrastructure and spanning more than 60 countries across Asia, Europe and Africa. China currently produces more than its economy needs in terms of steel, cement and other important materials and therefore looks to other countries for export. To incentivise the countries, China offers huge loans to build infrastructure in such countries; projects that will only be executed by Chinese companies using Chinese technical know-how.
The import of this is that China automatically acquires a market for its steel and cement, and creates employment for its huge population at home and abroad while the debtor nation continues to accrue debt that cannot be paid in years to come. It was reported last year that Sri Lanka had to cede one of its major ports, the strategic port of Hambantota, to China in 99 years lease agreement owing to the country’s inability to pay up over $8 billion owed to state-controlled Chinese firms. China’s new debt-trap diplomacy has been described as a strategy of the Chinese government to exert influence on other countries through cheap loans. China is strategically using debt as a snare to advance its economic interest in unsuspecting nations. And unlike the International Monetary Fund and World Bank, China often provides low-interest loans to nations that rely on commodities, such as oil or mineral resources, as collateral. This model is described as the “Angola Model” with the capacity to make the recipient nation suffer low credit rating from international rating agencies, and thereby making it more difficult for the country to obtain credit from international financial markets. This again pushes such country towards the Chinese for more loans. Some economic analysts have described this model first introduced in Angola in 2004 as Chinese strategy targeted majorly at securing control over Africa’s huge natural resources.
Sadly many African countries including Nigeria are falling for this trap. From 2000 to 2015, the Chinese government, banks and contractors extended US $94.4 billion worth of loans to African governments and state-owned enterprises (SOEs). The head sovereign risk analyst of Export-Import Bank of China, quoted by Brookings, announced in November 2013 that by 2025, China will have provided Africa with US $1 trillion in financing, including direct investment, soft loans and commercial loans. It is easy to see Chinese investments everywhere across Nigeria, which creates the illusion that they are helping to develop the country. There is also the delusion that the projects executed by the Chinese firms employ Nigerians and take many people off the labour market. However, it is a known fact that many Chinese companies in the country are notorious for casualization of workers with meagre pay that is in no way dignifying of human labour. Beyond the treatment meted out to Nigerian workers the danger of accepting Chinese loans is that African countries, including Nigeria, are walking into a trap that might be difficult to exit in the near future. The head of U.S. Overseas Private Investment Corporation (OPIC), Ray Washburne, recently warned that China is burdening poor nations with unmanageable debt through large-scale infrastructure projects that are not economically viable. Whilst some analysts may consider the warning from Washburne as demonstrative of US sentiment and the unsettling nature of Chinese incursion into Africa – a US economic stronghold – the import of the warning cannot be overstated. Yes, the Chinese loans may provide the infrastructure needed in many African countries in the short term but the long term advantage of Chinese loans is questionable. This is more so that in some instances, failure to pay back the loans may result in the ceding of state-owned properties or projects to the creditor.
Africa is a blessed continent with a vibrant population and enviable natural resources. The inability of the leaders to look inward and drive development has opened up the continent for exploitation by smart and shrewd foreign countries, which are strategically positioning to take control of the continent’s resources. It is the responsibility of the leaders to wake up to the current reality and protect the future of the continent. In this age of globalisation, it is difficult to not engage in international trade; however, this must be done in the best interest of the people. Africa cannot afford to continuously subject itself to economic slavery in a modern world.