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CHINESE INVOLVEMENT IN NIGERIA’S ECONOMY: CHALLENGES AND PROSPECTS

ABSTRACT

The study examines Chinese involvement in Nigeria’s economy.

Qualitative data of data collection was used in the study. In view of this, data were generated from secondary source materials. Data used in this research were sourced from relevant text materials. These include texts, journals, magazines, past project relating to this study, archives, publications of research work and internet. Content analysis method of data was adopted in the research.

The results revealed that; There is an intertwined between economic interests of China and Nigeria and what each wants from the other; There is benefits that Nigeria derives from China’s economic engagement in the country; There are challenges that confront China and Nigeria’s trade arrangement and the impact of those challenges on Nigeria’s growth plan.

The study concluded that, Chinese involvement has positive effect on Nigeria’s economy. The study further recommended that; The government should introduce transparency and accountability in both country government functions, particularly in all financial transaction; The government should focus on improving the quality of these goods and Nigeria authority needs; The Nigeria government should make concerted effort at policing its boarder to prevent the influx of smuggled goods into the country; Attempts to compromise the benefits of foreign direct investment should be persistently resisted by the Nigeria government and investors.

Chapter One

Introduction

Background of the Study

There has been a growing influence of China globally in the last two decades. One of the major changes that are shaping China’s growing economic and political impact is its “going out” policy which has led to negotiations and the signing of multilateral and bilateral trade agreements across the globe. These agreements have been brokered through the organization of groups such as the Forum on China-Africa Cooperation (FOCAC), established in 2000 as a meeting point to discuss trade between China and Africa. These kinds of interactions have facilitated the growth of economic linkages between China and Africa which have rapidly expanded in the past decade and a half.

Nigeria and China commenced diplomatic relations in 1971 with her assent to the Joint Communiqué on the establishment of diplomatic relations. By 1972, a six-man delegation led by Nigeria’s top government representative visited Beijing, where both countries signed an open-ended agreement on economic and technical co-operation and trade. In the aftermath of the open-ended agreement, other high profile Nigerian delegations visited China, culminating in the visit by General Yakubu Gowon, head of military government at the time, in 1974.[i]

The reign of General Sani Abacha between 1993 and 1998 made Nigeria seek greater ties with China because the North isolated Nigeria. Nonetheless, Nigeria trade relations with China was seen as a better alternative because of the genuine interest of China in trading with Nigeria based on some of its comparative advantage products such as energy, raw materials and market expansion.[ii] Cooperation has continued to the present. Since 1999 when democratic elections started, every Nigerian president has visited China. In 2005. China and Nigeria published a joint communiqué with China announcing Taiwan as an inalienable part of the territory of China. In 2015, China endorsed Nigeria’s attempt to become a permanent member of the UN Security Council, while Nigeria supported China’s position in territorial disputes in the Pacific region. China has also provided military support in counter-insurgencies efforts in the Niger Delta.[iii]

It is on record that Nigeria has huge potentials in agriculture, gas and oil reserve and human resources as a result of her populations. Thus, according to Oke, Oshinfowokan and Okonoda[iv], Nigeria remains one of the investment beneficiaries of China. China, on her part, has become the fastest investor in Nigeria because of these needs.[v] Chinese investment has since expanded into other areas of the Nigerian economy such as construction, telecommunication, services, manufacturing, and many sole-owned or joint venture companies.[vi] Chinese private investors have invested in the agro-allied industries, manufacturing and telecommunication while Chinese State-owned enterprise invests in natural resources and power and transport infrastructure. More so, China and Nigeria are prominent members of the G77-group of developing countries within the United Nations set out to promote South-South Trade and Cooperation. Nigeria and China trading activities have increased and spread to complex businesses.[vii]

Consequently, this study sets out to examine the nature of China’s economic involvement in Nigeria; assess the impact of mechanisms and measures such as One China Policy and Nigeria Naira-China Yuan Currency Swap on Nigeria growth and development and examine the challenges of the relations especially as it concerns the need to ensure balanced trade relations between Nigeria and China. Specifically, the prospects and challenges of China’s economic relations in Nigeria especially its contribution to national growth and development in the fourth republic.

Statement of the Problem

February 2020 marked the 49^th anniversary of the establishment of diplomatic ties between Nigeria and China. However, Nigeria’s quest for development is yet to deliver on the ultimate goal of poverty reduction and infrastructure, despite various plans, programmes, and projects.  To date, there exist a surge in Nigeria imports of Chinese goods relative to Nigeria exports to China, resulting in a trade deficit with China since Nigeria is yet to offer its industrial producers home-grown alternatives of the same quality at competitive prices. The current administration is making efforts to awakening Nigeria’s domestic economic sectors that are in comatose. There are home-grown rice, millet, wheat, maize, etc. supported by the Federal Government through Anchor Borrower programme of the Central Bank of Nigeria, as well as, deliberate closure of the border on some importation of some products into Nigerian markets. A currency swap initiative was also finalized between Nigeria and China to facilitate foreign direct investments into the two countries. However, not many investigations have been carried out as to the prospects and challenges of the initiative.[viii]

There is no consensus among scholars as to whether China’s engagement adds to or detracts from Nigeria’s economic growth and diplomatic relations. Also, there is no concrete evidence to address the implications of the political economy of Nigeria-China relations and the challenges of such relations. Thus, champions of trade argue that Nigeria’s manufacturing sector is underperforming chiefly because of inadequate infrastructure, so the Chinese goods are fulfilling a demand that would otherwise go unmet. Perhaps the strongest argument in favour of China’s presence is a forward-looking one. If Chinese construction companies can upgrade the countries’ roads, railways and power plants, Nigerian manufacturers could possibly become more competitive in the future.

Aim and Objectives of the Study

The study aims to examine the prospects and challenges of China’s economic relations in Nigeria since the start of the fourth republic. To achieve this goal, the following objectives will be examined:

1. To examine the intertwined economic interests of China and Nigeria and what each wants from the other.
2. To examine the benefits that Nigeria derives from China’s economic engagement in the country.
3. To highlight the challenges that confront China and Nigeria’s trade arrangement and the impact of those challenges on Nigeria’s growth plan.

Significance of the Study

This study is significant in diverse ways. First, by examining the challenges and prospects of China’s economic engagement with Nigeria, it would be possible to put in place extensive measures through which the relationship can be beneficial. This study is also important because it creates a new approach to understanding the Sino-Nigerian relations, analyzing the challenges of the relationship, with a focus on Nigeria’s growth plan, which gives a stronger analysis of the relations.

Scope of the Study

Specifically, the paper covers an examination of the economic relations between China and Nigeria especially its contribution to national growth and development between 1999 and 2020. The idea is to assess the contribution of the democratic rules to the trade business style of Nigeria especially as the government tends to satisfy the interest of her people.

Literature Review

The necessity of the review of relevant literature is to determine the extent of works done on the area of study, as well as what the present study can benefit and the loopholes. Research work is not compete without having an insight and understanding of related knowledge or information in literature relevant to the study. An understanding of existing related works will give the researcher a better insight into the problem area. He will not only be equipped with information on what has been done but also what is yet to examined. It is on the above statement that one can consider the content and nature of related publications on China’s economic engagement with Nigeria.

Oke, Oshinfowokan and Okonoda[ix] report that the relations between countries as always been defined and pursued by national interest coupled by comparative advantage, meanwhile, globalization has fuelled interdependence, integration and technological connectivity amongst countries of the world. This situation has led to trade liberalization. The trade relations between Nigeria and China has always been of mutual benefits to the two countries, probably because the two countries are prominent member of the G77 group of developing countries within the United Nations. The era of General Sani Abacha made the relationship stronger as Nigeria shifted from the North to the South and engaged China more having been rejected by the Northern allies of developed capitalist nations.

Thus, the study of Oke, Oshinfowokan and Okonoda interrogated the trade relation between Nigeria and China. It equally examined the perceptions of Nigeria entrepreneurs in pushing for balance of trade relations between Nigeria and China using the quantitative and qualitative methods. The study found out that for Nigeria to get more gains from China, Nigerian traders, manufacturers and organized trade organization must be carried in decision-making and shun importation of already made goods that can be produced locally; support local industries to enhance their production capacity; more interaction between the businessmen of both countries, government official and politician; allowing independent functioning of institutions created to promote trade and investment without interference. Although the brief analysis presented in this report points to a similar trend in the general trade and investment patterns with the traditional trade partners there is a strong need to critically examine in details Nigeria-China relationship.

In Umo-Odo and Orifa[x], the authors examined Nigeria’s bilateral trade relations with China from 1999 to 2016. The relationship has of recent been a source of concern as this has to do with China’s seemingly interest or quest to dominate the Nigeria economy and market by flooding Nigeria’s market with what some scholars described as sub-standard products. Hence, the authors used the dependency theory based on an historical descriptive approach to evaluate the relationship between the two countries. The major findings of the study showed among others, that the relationship Nigeria had with the Chinese counterpart had developed a wide range of trade imbalance between the two countries. Between 2013 and 2016, Nigeria’s trade deficit with China was 16.9 U.S dollars. Chinese investment and industrialization in Nigeria was far beyond the expectations of Nigerians compared to what they are gaining from Nigeria. Based on the above findings, it was recommended among others that, one effective approach to address the trade imbalance is to evolve a cooperative mechanism that would enable Nigeria increase its export of manufactured goods to China. Also, it was recommended that Nigeria should learn from the socio-economic transformation. They noted that as Nigeria rallies to industrialize its economy, it will not be out of place if she emulates the Chinese model that is relevant to our local environment.

Further, Adunbi and Stein[xi] noted that the transition to civil rule in 1999 and the eventual consolidation of a liberalized economy by successive administrations have resulted in the signing of several business deals with the Chinese government and Chinese enterprises. In line with the Federalist structure of the Nigerian government, many of these new enterprises have arisen from collaborations between Chinese companies and state and local governments in Nigeria. While central government efforts to shift the economy away from oil dependency have largely failed, state and local governments, at least on the surface seem committed in working with Chinese firms to increase investment in enterprises that will help generate a growth-oriented diversified economy. However, Chinese interests in Nigeria appear to continue to focus on oil extraction and related industries. Bogale[xii] reiterated that in terms of sectors of engagement, Chinese investment is more concentrated in few sectors which are of strategic importance to the country. For Nigeria, it was found that the oil industry which takes lion share of Chinese foreign direct investment (FDI) in the country.

The imbalance in trade relations can be addressed to ensure that the relations lead to mutual beneficial outcomes for both countries. The structure of trade between Nigeria and China reflects the difference in the level of development of the two partners, as well as high degree of complementarities that exists between their economies. Although trade remains the most important element in Nigeria’s trade relations with China, it has not been complemented significantly by the flows of investment and aid between the two countries. The consequence of intensive asymmetric bilateral interaction to the achievement of Nigeria’s broader national goal should be given serious thought by the Nigerian policy makers and the public alike as such relationship could be jeopardized if one- sided trade relations continue. A continuation of this pattern of lopsided relationship might have serious repercussions for Nigeria. The intensification of dependent relationship can provide an enormous advantage to China in continuation of its economic and industrial expansion.[xiii]

Following the above review, there is, thus, some questions of the nature of China’s trade engagement in Nigeria in which China has overwhelmingly exported manufactured goods and imported mostly oil and other primary commodities which are raw and unprocessed. Nigerian relations with China have followed a similar pattern though with worse trade deficits and even higher levels of manufactured good compared to the rest of sub-Saharan Africa. While the review presented, so far, is general, an investigation of some of the issues raised probably by conducting an historical analysis of Chinese interest in Nigeria, especially in the fourth republic, is capable of shedding more light.