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Lopsided Trade Relation: How China Feeds Fat off Nigeria

By Eric Elezuo

The People’s Republic of China, in recent times, has been considered one of Nigeria’s closest allies and partners in terms of bilateral trade relations and strategic cooperation. China is also one of Nigeria’s important trading and export partners. According to a 2014 BBC World Service Poll, 85% of Nigerians reportedly view China’s influence positively, with only 10% expressing a negative view, making Nigeria the most pro-Chinese nation in the world.

Nigeria and China established formal diplomatic relations on February 10, 1971. Relations between the two nations grew closer as a result of the international isolation and Western condemnation of Nigeria’s military regimes (1970s-1998). Nigeria has since become an important source of oil and petroleum for China’s rapidly growing economy and Nigeria is looking to China for help in achieving high economic growth; China has provided extensive economic, military and political support.

The importance of China to Nigeria’s development necessitated that in 2004 and again in 2006, when the Chinese President, Hu Jintao, made state visits to Nigeria, he addressed a joint session of the National Assembly of Nigeria – a very rare privilege. Both nations signed a memorandum of understanding on establishing a strategic partnership, which shored up bilateral trade relationship to the tune of US$3 billion in 2006 from $384 million in 1998.

As the trade relationship develops, China secured four oil drilling licenses and agreed to invest $4 billion in oil and infrastructure development projects in Nigeria, and both nations agreed to a four-point plan to improve bilateral relations – a key component of which was to expand trade and investments in agriculture, telecommunications, energy and infrastructure development in a clear cut one sided growth. While Nigeria continued to receive, China has been giving, thereby ripping huge financial benefits from Nigeria in exchange

Although Nigeria maintains trade relations with Taiwan, and has a representative office in Taipei, it issued a joint communiqué with China in 2005, reaffirming that Beijing was “the only legitimate government representing the whole of China and Taiwan is an unalienable part of its territory”.

Furthermore, China had bought a controlling stake in the Kaduna oil refinery that would produce 110,000 barrels per day (17,000 m3/d), just as Nigeria has relinquished preference to Chinese oil firms for contracts for oil exploration in the Niger Delta and Chad Basin.

The level of China’s influence in the economy of Nigeria prompted the granting in 2006 of a loan $1 billion to Nigeria to help it upgrade and modernize its railway networks.

In 2005 Nigeria agreed to supply PetroChina with 30,000 barrels per day (4,800m3/d) of oil for $800 million. In 2006 the CNOOC purchased a share for $2.3 billion in an oil exploration block owned by a former defence minister. China has also pledged to invest $267 million to build the Lekki free trade zone near Lagos.

China’s growth in the Nigeria market led to the “flooding” of Nigerian markets with cheap Chinese goods which have reduced Nigeria’s Small and Medium Entrepreneurs and enterprises to almost nothing and adversely affecting domestic industries, especially in textiles. The outcome is the closure of over 65 textile mills and the laying-off of not less than 150,000 textile workers over the course of a decade. In 2010, trade between the two countries was worth US$7.8 billion with the balance of trade clearly favouring the Chinese.  In 2011 Nigeria became the 4th largest trading partner of China in Africa and in the first 8 months of 2012 it was the 3rd.

Even though China and Nigeria have vastly different historical experiences and cultural traditions, Beijing has been remarkably successful in its efforts to promote Chinese culture in Nigeria. Student exchanges and the proliferation of Chinese media in Nigeria have been the primary mechanisms underpinning the increasing cultural synergy between the two countries with China having the upper hand as usual.

The Chinese film industry has been highly successful in promoting its showcase productions to a Nigerian audience as well. The December 2015 Chinese film festival in Lagos, featuring Chinese films like Chinese Zodiac, Confucius, and Monkey King, attracted large numbers of students and Nigerian government representatives. As more Nigerians learn Chinese, turnout to these events has certainly increase, bringing more financial benefit the way of the Chinese.

China’s special relationship with Nigeria, forged through deep-rooted political bonds and cultural exchanges, is a major victory for its soft power campaign in Africa. As pro-Chinese sentiments in Nigeria are overwhelming at both the elite and popular level, Nigeria is a perfect testing ground for future Chinese alliance-building efforts in other African countries in the years to come.

Recently, President Muhammadu Buhari was in China to sign a loan infrastructure projects deal worth about $2 billion and the ‘low interest’ loan was supposedly to be deployed to finance the N3 trillion deficits in the budget. According to the President’s Special Adviser on Media and Publicity, Mr Femi Adesina, he said: “I can’t tell you how much until the day the loan will be signed.”  Both countries will also be signing some bilateral agreements to strengthen their relationship that is all I can say for now.”

The loan was part of the about $5 billion the Federal Government intended sourcing abroad to cover part of its 2016 budget deficit. While borrowing, Buhari also signed “cooperation agreements” which financial experts have said is laced with the trappings of master-servant relationship, the 1.5 interest rate notwithstanding.

In the first eight months of 2017, China-Nigeria bilateral trade cooperation hit $2.7 billion dollars in line with the supposed fundamental and long-term interests of both countries.

According to The Consul General of the Peoples’ Republic of China to Nigeria, Mr. Chao Xiaoliang “China-Nigeria bilateral trade volume reached 10 billion USD from January to August 2017, and investment from China reached $2.7 billion dollars.”

Even as China insists that the cooperation has tremendously helped in promoting peace, stability and development of Africa and the world, Nigeria is yet to have a solid base in the balance of payment and balance of trade status of both countries.

It is believe that the bilateral cooperation should result in a win-win affair; the case is different, as Nigeria remains at the receiving end without the grace of boasting of giving out anything in exchange. Most Chinese expatriates in Nigeria are in leadership position and call the shots as against Nigerians in China who are practically instruction takers. What these means is that the Chinese cooperate with Nigeria in many areas, dishes loans out and are in the forefront of executing whatever projects initiated. Nigeria is nowhere in the scheme of things other than to receive and continue to receive – no relative economic impact. The unbalance affair is what gave rise to the influx of sub-standard Chinese goods in Nigeria, which has basically silenced the SMEs.

The Chinese CG has intimated that the two countries have gained fruitful achievements from their ‘friendly and mutually beneficial cooperation’ in various facets of the countries’ economy, the fact remains that one is far ahead of the other.

Consequently, by deepening China-Nigeria friendly relations, China has taken on arduous task of developmental strategies and has maintained very strong corresponding economic complementarities and enormous cooperative potential.

Nigeria is supposed to gain the benefits of the ‘Belt and Road Initiative’ as an ideal platform and framework to conduct cooperation with China and other countries if possible, in order to obtain more opportunities to strengthen her infrastructure, diversify her economy and integrate with the world economy.   But the standpoint to achieving same has been ridiculed by its inability to call the shots in bilateral relations.

From 2014 to 2016, a total trade between China and other Belt and Road countries, Nigeria inclusive, exceeded 3 trillion US dollars and China’s investment in these countries surpassed $50 billion US dollars, detailing that Chinese companies have set up 56 economic cooperation zones in over 20 countries, and have generated 1.1 billion US dollar tax revenue and over 180,000 jobs. The fact remains that investment and production raises the bar of economic superiority, and china has remained in the forefront of investing, and that leaves Nigeria in the category of ‘crumb picker’.

Nigeria has remained the underdog in the bilateral trade relation for no taker reaps. The Chinese provides the loan, and provides the execution, gets paid for the job, receives their loan back with interest and manages the project when and if completed. They have all the edges.

Until Nigeria learns to develop its SME, invest in the production and exportation of finished products, China will continue to feed fat off the nation. The trade relation is heavily lopsided.

 Reacting, an economist, Mr Emmanuel Nneke, opined that selfish interest of the political elites is the reason behind many of the wrong economic decision made by government with developed countries such as China.

Hear him: “ There is nothing wrong if Nigeria has economic ties with other countries but in a situation where such ties does not favour us or we do not derive the same benefits as much as the other country does, this is where the problem lies.

China, being a superpower economically sees Africa as an avenue to rival United States in terms of trade, and Nigeria being the most populous country on the continent and a major trade partner with United States, is an attractive ground for Chinese government to achieve its objectives in Africa,” he said.

He added: “However, in the process of entering into trade agreement with China, the government fails to look into how such agreement will benefit Nigeria maximally. The decision makers are only interested in what they will gain financially. Some of them have shares in many of these trade agreements. Take for instance importation of textile materials. Some government officials are involved in importation of these materials while some are shareholders in Chinese owned companies in the country.

 The influx of Chines made materials ranging from building materials to household items, textile, shoes, bags e.t.c, have resulted in the low patronage of our locally made goods thereby killing our local industries. Yet government turns blind eyes to these issues.”

Another financial expert, Adewale Adeoye said the volume of trade between Nigeria presently stood at $2.7billion, adding that in spite of such huge trade transaction, Nigeria has benefitted little from it.

“The China-Nigeria bilateral trade hit N12.3 billion dollars in 2017. However, I am yet to see how Nigeria has benefitted from such trade. The questions we need to ask ourselves is how many Nigeria goods are allowed to enter China compare with Chinese goods that are flooding our markets? The money the Chinese government is making in Nigeria, how much of it are they investing back into our economy to create jobs? How many companies have they established? They get construction jobs here and repatriate the money to their country. Do they invest in the entertainment, sports or SMEs sector?  What impact do they have on our education sector? These are issues for concern.”

 He advised that the federal government needs to renegotiate the trade agreement in a way that it will be fair to both parties.

“What the government needs to do is to ensure there is balance in benefits that accrues to both parties. Lopsided bilateral relationship as it is now will do us no good. The Minister of Trade and Investment must renegotiate on behalf of the government and agreement that will suit both parties,” he advised.

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