By Mike Ozekhome

INTRODUCTION

Nigeria has the largest population in Africa and one of the largest in the entire world (214.4 million people as at 18^th February, 2022). Nigeria has about 374 ethnic groups (Onigu Otite) amongst its population, with over 500 languages and roughly 65% younger than 25 years. The Nigerian government runs on a democratic presidential system modeled after the American system. One of the oldest locations that showed signs of human existence with evidence dating back as far as 9000 BC, Nigeria has the potential to become one of the strongest economies in the world. Some have even tipped Nigeria to top the charts by the year 2050.

The economy has since become the largest in Africa. However and most unfortunately, Nigeria is highly dependent on revenue from a-mono-product from oil and gas, being one of the largest producers of crude oil globally. Changes have now been proposed to help diversify the economy with other industries showing significant growth opportunities being consumer goods and retail, real estate, agriculture and infrastructure.

INCENTIVES TO INVESTORS

The Nigerian government has also introduced a number of incentives to attract foreign investors. These include a favorable company income tax, Pioneer Status Grants, Free Trade Zones and tax relief for research and development. Investors can also repatriate 100% of profits and dividends, while full ownership of companies is granted in all sectors apart from oil and gas.

CHALLENGES OF DOING BUSINESS IN NIGERIA

Outside these advantages, the potential challenges of doing business in Nigeria include wide-spread corruption, cyber threat and political risk with violence, terrorism, armed banditry and ransom-oriented kidnappings. Furthermore, analysts and risk-managers cite difficult macroeconomic conditions and market volatility as other obstacles to be aware of when considering to business in this part of Africa. For these reasons, Nigeria appeared better suited to experience and establish export missions, rather than early-stage start-up companies.

THE SINO-NIGERIAN PACTS

In the light of the foregoing, Nigeria and the People’s Republic of 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 dictatorships (1970s-1998). Nigeria has since become an important source of oil and petroleum for China’s rapidly growing economy, while Nigeria looks up to China for help in achieving high economic growth China has since provided extensive economic, military and political support to her. Bilateral trade reached US$3 billion in 2006 – up from $384 million in 1998. During Chinese President Hu Jintao’s visit in 2006, China secured four oil drilling licences and agreed to invest $4 billion in oil and infrastructure development projects in Nigeria. 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. Furthermore, China agreed to buy a controlling stake in the Kaduna oil refinery that would produce 110,000 barrels per day (17,000 m³/d). Nigeria also promised to give preference to Chinese oil firms for contracts for oil exploration in the Niger Delta and Chad Basin. In 2006, China also agreed to grant a loan of $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 (4,800 m³/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.

CHEAP CHINA, CHEAP ARTICLES

Chief Dana Chen, Chairman China-Africa Business Council (CABC); early 2021, promised to increase the volume of trade between China and Africa from $30 billion to $300 billion. However, the “flooding” of Nigerian markets with cheap Chinese goods has become a sensitive political issue, as – combined with the importation of second-hand European products – it has adversely affected domestic industries, especially in textiles. This has led to closure of 65 textile mills and the laying-off of 150,000 textile workers across the country over the course of a decade. Nigerian militants had also threatened to attack Chinese workers and projects in the Niger Delta. In 2010, trade between the two countries was worth US$7.8 billion. In 2011, Nigeria was the 4th largest trading partner of China in Africa and in the first 8 months of 2012, it was the 3rd. Today, Nigeria with over $26 billion is the second largest trading partner to China, next only to South Africa with about $54 billion.

In April 2018, Nigeria signed a $2.4-billion currency swap deal valid for 3 year. In 2019, bilateral trades between China and Nigeria reached $19.27 billion. From 2000 to 2011, there are approximately 40 Chinese official development finance projects identified in Nigeria through various media reports. These projects range from a $2.5 billion loan for Nigerian rail, power, or telecommunications projects in 2008; to an MoU for $1 billion construction of houses and water supply in Abuja in 2009, and several rail networks.

Since 2000, trade relations have risen exponentially. There has been an increase in total trade of over 10,384 million dollars between the two nations from 2000 to 2016.

However, the structure of the Sino-Nigerian trade relationship has become a major political issue because Chinese exports accounted for around 80 percent of total bilateral trade volumes. This has resulted in a serious trade imbalance with Nigeria importing ten times more than it exports to China. Nigeria’s economy is becoming over-reliant on cheap foreign imports to sustain itself, resulting in a clear decline in Nigerian Industry under such arrangements. In September 2018, Nigeria yet again signed a $328 million loan with China to heavily boost the development of telecommunication infrastructures in Nigeria.

China has provided the financing for the following projects in Nigeria:

• Abuja-Kaduna Railway; Abuja Metro Light Rail, Abuja and Port Harcourt Airport terminals;
• Lekki Free Trade Zones, Ogun – Guangdong;
• Zungeru Hydro Power Dam; and
• University of Transportation, Daura.

In exchange, Nigeria often systematically hired a Chinese firm to oversee its development projects, such as the 3,050 MW Mambilla hydroelectric Power Station. China’s investment in Africa and by extension Nigeria, is phenomenal and has over time progressively transformed into Africa’s largest trading partner surpassing traditional partners such as Europe and the United States of America.

THE CATCH

Perhaps, not many developed countries of the world will be ready to play the big role that China is currently playing in Africa to develop infrastructural projects that will liberate the continent from the clutches of acute poverty due to a lack of basic infrastructures. Nigeria, the most populous nation in Africa is a major beneficiary of some of these initiatives through ambitious infrastructural projects that are springing up across the country. But, this at a huge cost.

In Nigeria, it is estimated that over 70 per cent of imported products are fake and substandard. The high volume of counterfeit and sub-standard products in the domestic market is threat to Nigeria’s economy, raising serious doubts on current efforts by the Federal Government to resuscitate the real sector to contribute meaningfully to Gross Domestic Product (GDP). In 2015, I went with my wife to China. We wanted to buy transformers and generators. The Chinese sellers asked us pointedly if we wanted the standard original, or the Nigerian downgraded version. We were shocked.

An estimated N15billion is believed to be lost annually to fake or counterfeit goods in terms of loss of tax revenue to the government, income to local manufacturers, and employment generation to Nigerians. In fact, it is a tragedy to report that in Nigeria, for every fast-selling genuine product circulating, counterfeiters would either pirate or produce something similar without regards for standards and specifications, especially to the health and safety of the populace.

There is virtually or hardly any product that is not either faked or its quality sub-standard when compared with the original. From the pharmaceutical to the textile; beverage, ceramics, electrical and electronics; book publishing; music and even Nigeria’s fast rising home video industry. The greatest fear nursed by genuine investors remains how best to recoup their investments and remain in business amid challenges of infrastructure and the untrammeled influx of fake counterfeit goods, counterfeiting and piracy in the country.

Counterfeiting destroys creativity, acts as a bane to the efforts of genuine manufacturers, discourages investments and entrepreneurship, as it renders their goods non-competitive. But more worrisome is the fact that sub-standard goods are inimical to the health and safety of citizens. Hundreds of Nigerians are reported to have died after consuming sub-standard drugs. The establishment of NAFDAC in 1993, was in fact government’s direct response to the high casualty rate recorded from the use of fake drugs.

There are many cases of collapsed buildings which are linked to the usage of sub-standard materials by builders. People die like chickens under such circumstances. In the road construction industry, billions of naira are invested in road construction only for them to collapse after few months of their commissioning due to use of substandard materials.

Modern infrastructure availability is one of the indicators of advancement of any society today. It is the blood that keeps any modern society and economy alive. This ranges from roads, bridges, airports, seaports, railways, power plants, dams, telecommunication facilities, etc. Indeed, the level, quality and standard of the infrastructure of a country is a core indicator of its rating in development or advancement.

One major area of the Chinese strategic relationship with Nigeria is the building of rail infrastructure as stated earlier, which is gradually positioning Nigeria as a modern economy with infrastructural underpinning. In this stead, in recent years, the China Civil Engineering Construction Company (CCECC) has delivered four major railway projects after completion, all with a total stretch of 712km. However, critics who have travelled abroad believe that qualities of the projects are highly suspect.

Take note, sometime in December 2020, one of the latest of China’s many industrial investments in Nigeria, the railway line between Lagos and Ibadan, became operational. Running 156 kilometres long and costs about $1.5 billion US dollars. Its opening was accompanied by public fanfare in Nigeria and China, where it was seen as another double victory for Chinese-led development, and China’s public image in sub-Saharan Africa. (To be continued).

FUN TIMES

“As you dey wear leg chain try rub cream for the leg this dry season make your leg no resemble stock fish we dem use rubber band tie”.

THOUGHT FOR THE WEEK

“We cannot be mere consumers of good governance, we must be participants; we must be co-creators”. (Rohini Nilekani).