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Nigeria/China: Still a long way to go

Lekki Free Zone

Lekki Free Zone

Nigeria’s bilateral ties with China have been on for more than two decades, and is calculative, punctuated by technological and economic milestones, and productive collaborations.

The latest of the alliances is the currency swap deal reached between the two countries during President Muhammadu Buhari’s recent visit to the Asian giant so as to have China’s Yuan also known as Renminbi as part of Nigeria’s international currency reserve to ease trade relations.

This is coming on the heels of economic hardship being experienced as a result of slump in oil prices and consequent steep in foreign exchange earnings.

Fixing the ‘wobbling’ economy posed as one of the hardest nut for the Buhari administration to crack, as a policy on forex restrictions has spiked inflation, scuttled foreign credit remittances and posed huge bottlenecks for manufacturers, who import inputs for production.

So, it was with mixed feelings that Nigerians received the news of the currency swap deal with China, whose footprints are already well implanted on the Nigerian economy. There have been partnerships in trade, space technology and exploration, free trade zone development and military efforts.

The Beginning

NIGERIA’s dealings with China have a long, eventful history. The two countries formally established diplomatic links on February 10, 1971, a year after the end of the Nigeria Civil War. The relationship grew following sanctions on Nigeria by the West, as a result of excesses of military rulers that dominated the political space in the country from the 1970s till the return to democracy, the Abacha regime, most importantly. Nigeria became a close partner to China as a result, and as at 1998, the volume of trade between the two countries stood at $384m.

Obasanjo Years

DURING the Obasanjo’s administration, the ties with China grew in leaps, so much that the country’s president at the time, Hu Jintao, visited in 2004 and again in 2006. Both countries signed agreements to develop strategic partnerships.

Analysts believe that China started showing interest in Nigeria because not only did the country want to source oil from Nigeria to power its fast-growing economy, it also saw the country as a potential market for its goods.

This was also the period of violent militancy in Nigeria’s Niger Delta, the heart of the country’s crude oil production. At the height of agitations, China provided arms, equipment, training and technology to Nigeria’s army to combat the militants, when the West refused to offer support.

During Hu’s second visit in 2006, China secured four oil-drilling licences from Nigeria, in exchange for investment worth $4b in oil and infrastructure projects in Nigeria. It was also agreed that China would buy a controlling stake in the 110,000-barrel-a-day Kaduna refinery, as well as build railways and power stations. The highpoint of the visit was when President Hu addressed a joint-session of Nigeria’s National Assembly.

As a fall-out of the visit, the next year, the two countries struck a landmark achievement with the launch of Chinese-manufactured communication’s satellite, NIGCOMSAT-1, to orbit on behalf of Nigeria. The satellite was to be managed from Abuja. It was the first time China ever built and launched a commercial satellite to space on contract for another country.

Launched at the Xichang space center in southwestern Sichuan province, the satellite was a testament to China’s growing expertise in space technology, and an advertisement to the world that the country had developed immense capacity for space exploration. Nigeria, then, was its willing partner to boast to the West of the wonders in the East.

Jonathan Era

DURING President Goodluck Jonathan’s administration, trade and political relations between the two countries got a boost with Jonathan’s visit to China in July, 2013. A number of agreements were signed among, which are those for the renovation and expansion of four airports and, curiously, a deal for “the Central Bank of Nigeria to convert some portions of Nigeria’s foreign reserve from the United States Dollars, to the Chinese Yuan,” the former president said during the visit.

Other agreements signed included those on visa regulations, legal issues involving the import and export of cultural properties, as well as economic and technical cooperation.

Also, during the visit, First Bank of Nigeria signed an agreement with China Development Bank to support small and medium enterprises (SMEs) in Nigeria with an on-lending facility of $100m.

Jonathan said: “The annual bilateral trade between both countries rose from $2bn in 2002 to $13bn in 2012. The trade between Nigeria and China accounts for nearly one-third of the trade between China and West Africa, and this will continue to grow bigger, indicating the importance of Nigeria to China in the regional market. Beyond trade, China has been instrumental to supporting Nigeria with financial arrangement and investment in strategic infrastructural projects like rail, road and free trade zones, among others.”

The then Minister of Trade and Investment, Olusegun Aganga said there was an agreement with the largest coal-to-power company in China to invest in Nigeria.

Infrastructure

THE Chinese have been instrumental to helping Nigeria speed up on infrastructural development, as it has acted as an active partner in providing finance and expertise for building roads, railways and airports.

From 2000 to 2011, experts say there are approximately 40 Chinese official development finance projects identified in Nigeria. Some of the projects range from a $2.5 billion loan for a Nigerian rail, power, or telecommunications projects in 2008, to agreements for $1b to construct houses and provide portable water in Abuja in 2009, and several rail networks.

The Chinese okayed a $1b loan from its Exim Bank to modernise railways in Nigeria in 2006, with an undertaking that Nigeria would provide counterpart funding for rolling stuck and equipment.

This was prequel to about N60b the country had set aside for the development and construction of the Coastal railway in Nigeria, for which Nigeria was to commit about N80b.

This is outside the presence of Chinese Civil Engineering Construction Corporation (CCECC) in the country to execute much of construction work and build local capacity, as a couple of Nigerians are in the company’s employ.

Trade relations

THE Chinese have maintained a strong trading presence in Nigeria for decades. Famous for cheap labour, Chinese goods found their way to Nigeria, in a manner, many say, was detrimental to the local manufacturing industries, leading to a $23.5b volume of trade as at 2015.

According to the Nigeria-China Business Council (NCBC) bilateral trade relations between the two countries has risen from $2.7b in favour of China and $700m for Nigeria to $13b and $10.5b in favour of both countries respectively.

But there have been frequent complaints on substandard products being dumped in Nigeria from China, to which the Chairman of NCBC, Mathew Uwaleke, says: “We are now talking to partners to bring home their expertise and manufacture for us made-in-Nigeria products, fit for global consumption and also for our environment.”

“With such efforts, we want to see them investing in manufacturing of goods that fit our environment, services that are of global standard and not what we see today,” he added. Aside oil, Nigeria exports cotton and cocoa to China, Uwaleke said.

However, the Chinese Ambassador to Nigeria, Gu Xiaojie, said recently that trade between Nigeria and China had fallen to $14.9 billion because of the slump in global oil prices. He noted even as low oil prices have caused a decline in trade volume, Nigeria remains the second largest market for Chinese exports in Africa.

“It was a bit down with the previous year 2014, but still Nigeria remains the third biggest trading partner of China in Africa and Nigeria is the second biggest market of China’s exports to Africa,” Xiaojie stated.

Lekki Free Trade Zone

THE Chinese have been instrumental to the establishment of a free trade zone in Nigeria as part of the partnerships reached over the years.

Though, plans for setting up of the FTZ in Lekki Lagos, were signed in 2006, evidence of the project has just only sprouted. The Lekki FTZ was the first ever of such project outside of Chinese territory. The funds made available would be used to build power plants, roads and workshops to manufacture goods.

Head of a visiting Chinese delegation, Chen Xiaoxing, said: “China will contribute its experience to develop Nigeria’s economy. China has signed a $2.5mn soft loan agreement with Nigeria to help her develop her infrastructure.”
He assured that goods produced in the zone would be of international standard because the zone will be an international location for manufacturers who would be regulated by the International Standard Organisation’s (ISO) rules and regulations,” adding that the FTZ would create about 3 000 jobs during its first phase.

In the Buhari era, partnership with China is blossoming. Hopefully, a more fiscally disciplined Federal government will lead to faster fruiting of the agreements.



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