Gains of Nigeria-China deal, by experts
• Chinese investors raise concerns over Nigerian market
• Why China sends inferior products to Africa
Stakeholders at an Africa Today Summit on China-Africa Trade and Investment in Abuja yesterday urged the Nigerian government to define its priorities in its latest deal with China to ensure a win-win for both parties.
In making the call, the experts noted how trade relations between Nigeria and China were skewed against Nigeria.
Also, there are concerns that the fall in global oil prices is affecting how Chinese investors perceive the Nigerian market.
World-renowned expert on China’s relations with Africa and U.S.-China cooperation on the continent, Prof Yun Sun, who led discussions on the latest Chinese concerns, noted how China was becoming increasing concerned about the viability of the Nigerian market.
Citing the Abuja-Kaduna rail as a case study, she narrated the fears among the Chinese community about the profitability of the venture and the capacity of the project to raise enough money from passengers and cargoes to fund the China Exim bank loan and the interest thereof.
Sun, who responded to several questions on the recent China-Nigeria deal, noted: “In our own analysis, market volatility is a key concern, whether the market is resilient enough in terms of the price to commodity price fluctuation.
“For instance, we know that in the past most of Chinese projects sign on were backed by oil. There are worries if it still makes sense to go into the same kind of deals. Now that prices are low, there are concerns if these infrastructures in Nigeria are commercially viable. If you look at, for example, the railway that the Chinese have been building between Abuja and Kaduna.
“The Chinese are asking the question if the local market has enough passengers, enough cargoes to generate revenue along this rail, not only to cover the operation of the railway, but also to cover the loans and the repayment of the interest. That is a very difficult question to answer, because, yes Nigeria has a pretty large population, but what would the price of the train ticket have to be for that railway to be commercially viable? That is a question for the Chinese concern in their investment in Africa.”
Sun, who is a nonresident fellow in the Africa Growth Initiative, at the prestigious Washington DC-based Think-tank, The Brookings Institution, noted that China was also interested in making money in Africa like its competitors.
She noted: “China is interested in Africa, but China is also interested in making money in Africa. If you look at the whole deal, yes there was an amount that the Chinese government was trying to pull out for the whole project. But a lot of factors did evolve to gradually change that practice. The first is China’s own financial capability. We know that China’s reserves have been dropping. There are questions in China about all these investment behaviours and concessionary loans in Africa have been responsible from the Chinese government perspective.
“Secondly, there are concerns about maybe China should introduce other financiers into these projects, because if the Chinese does not work with global best practice and always follow the Chinese own practice, their behavior, their policy and their practice will never improve. And Chinese financiers do wish to improve their investment policies.
“Another model that the Chinese are increasing interested in is the Public Private Partnership (PPP) model. Chinese government is very determined to go into that kind of arrangement in the future for their financing.” She went on: “There is also a big factor in Chinese decision-making. There is a foreign competition. How many foreign powers are competing with China for favour of Nigeria? In the case of South
Asia or in the case of Asia generally, we know that China has been competing fiercely for the official development assistance (ODA), which offers interest rate of 1% or lower for the favours of Asian countries, which was why China was willing to give out government guarantee requirement, to put up a 2% interest rate in Indonesia. That was because of the existence of competition.
“The question for Nigeria is: who are the foreign competitors that can make the Chinese feel nervous about their viability and the prospects of them breaching the deals that they want and on their terms. So, the foreign competition factor is extremely important in this case.”
Answering questions on the quality of Chinese products, she stressed how Chinese producers sell products to African countries according to their purchasing power.
Her words: “I have been asked this question many times. I take these issues to them, and they say they are aware. And they say they see it as a problem, but say: ‘We sell what they are willing to pay.’ From their perspective and their answers, they say they have products of different levels of quality and all levels of prices and no one should expect the best quality of product with the lowest price. And that is not just economical and that does not follow all the rules. Their argument is best on supply, meeting the local demands given their economic capacity. They are willing and capable of supplying Africa with the kind of product that they sell to Europe, which they sell to the United States. But then the question is what African market can afford that’. I am not defending their position.
I am just saying that is some economic argument.”
Speaking on the quality of Chinese products, former United Kingdom’s Secretary of State for Business, Innovation and Skills, Sir Vince Cable, noted how China was now trying to build a reputation with the international community by improving the quality of its products.
He said: “What is happening is that they are Chinese companies trying to become global leaders and with high quality. Still, there are certain Chinese companies that don’t have those interests at heart.
Another general comment that I will make is that China has got a bad reputation in Africa for cutting corners, companies coming here to use timber that was not properly accredited, using wild animals for export and so on. I think in general, the Chinese authorities and the leading Chinese companies are now really determined to get away from that past.”
The summit’s chief host and publisher of Africa Today titles, Mr. Kayode Soyinka, described the summit as “timely, highly relevant and very important” especially on the issue of China-Africa trade and investment it is addressing “bearing in mind the just-concluded visit to China by President Muhammadu Buhari.”
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