FINANCE - 11 OCT 2019

Why is China interested in Nigeria?

Why is China interested in Nigeria?
Chinese interest in Nigeria may not be as deeply rooted as pundits imply

In 2018, the White House criticised Chinese engagement in Africa, claiming that China was using bribes, opaque agreements, and debt to hold states in Africa captive to its interests. Amid global focus on China in Africa, it is worth exploring Chinese activities in Nigeria, given its role on the continent, and its economic and demographic trajectories.

Public opinion has simplified the scope of Chinese interests in Nigeria (to debt or resource acquisition). However, the Brookings Institute identified four broad dimensions of Chinese interest, based on conversations with Chinese officials. Of the four, our attention lies with the economic—Nigeria as a key Chinese trading partner—and security—as China seeks to protect its investment in the region.

 

Economic Interests: Trade

Nigeria is Africa’s biggest economy and most populous nation, so China is incentivised to ensure that Nigeria’s expanding middle class continues to buy Chinese manufactured goods. Nigeria offers Chinese companies a diverse range of lucrative commercial and trade opportunities, regardless of size. As of May 2019, Chinese companies had invested $20 billion in over 150 firms in Nigeria.

The importation of Chinese-made consumable and manufactured goods to Nigeria underpins the two countries’ trading relationship as Nigeria is one of the largest and fastest-growing net importers of physical Chinese goods. In 2017, Nigeria’s top import sources were China ($9.6 billion), Belgium ($3.0 billion) and the Netherlands ($2.8 billion). Nigeria imports more from China than its other top two import sources combined, and in Q2’19, Chinese goods accounted for a quarter of all imported goods.

Nigerian entrepreneurs make regular commercial pilgrimages to Chinese manufacturing centres like Guangzhou where Chinese traders have come to rely on them for bulk purchases. Among African nationalities in Guangzhou, the two countries with by far the most people are the West African nations of Nigeria and Mali.

Conversely, Nigeria does not rank in the top 10 for Chinese imports sources. Even within Africa, China imports more from Angola, South Africa, and the Republic of the Congo. China imported $1.5 billion from Nigeria in 2017, equivalent to less than 0.1% of its total imports.

Despite Beijing’s insistence that the relationship is mutually beneficially, there is evidence that Chinese goods are flooding the Nigerian market in a way that is harming local businesses. Unable to cope with cheap imports and increased smuggling, the domestic textile industry has been hit hardest. In 2007 the head of the Nigerian Textile Manufacturers Association said the number of textile producers in the country had fallen from 200 to 28.

Chinese manufacturing operations contribute to GDP but offer tough competition for local producers. According to the Chinese government, Chinese companies operating in Nigeria employ 30,000 local workers but this pales in comparison to the 350,000 manufacturing jobs that labour unions say have been lost because of Chinese imports. Ironically, many of the textile factories that have been forced to shut down were Chinese-owned plants that had been operating in Kaduna since the 1970s.

Like all matters of trade, an argument can be made for and against Chinese imports in Nigeria. On one hand, Nigeria has welcomed the opportunity to trade with a lower-cost economy and enjoy cheaper merchandise. Yet the nature and consistency of the grievances suggest that the trading relationship benefits the Chinese more than Nigerians, or, at the very least, China has exploited the relationship a lot more cannily than Nigeria.  

 

Security of Chinese Investments

Another salient feature of China in Nigeria is China’s state-directed investment in major infrastructure and industrial projects. Many large Nigerian infrastructure projects are financed by low-interest Chinese loans. Chinese firms are in the process of executing more than $20 billion in rail construction contracts across Nigeria, including new commuter railways in Abuja and Lagos. Many Chinese firms operate in free-trade zones often overseen by Chinese-led management teams appointed by Nigerian government officials. These businesses are benefiting from a growing network of subnational commercial ties between Chinese provinces (Guangdong, Hebei, and Jiangxi, for example) and some Nigerian states.

In order to avoid embarrassing attacks on its citizens or costly commercial setbacks in Nigeria, China actively seeks to ensure security and stability in Nigeria. China sees its security interests in Nigeria as an offshoot of its trade priorities in the country. This is unlike the United Kingdom and other western countries who view security concerns as a major focus and actively deploy resources to work on this agenda.

In 2014, Chinese officials vowed to help defeat Boko Haram along with some Western countries. The agreement was that China would provide “any useful information acquired by China’s satellites and intelligence services”. However, these types of bilateral agreements are hard to implement and monitor as China actively pursues a non-interventionist policy in Nigeria. For this reason, Chinese security strategy in Nigeria is self-protective and reactive. Chinese businesses in the country rely on private guard companies who are usually unarmed and/or off-duty police officers to guard their facilities and personnel.

Key economic figures like Lamido Sanusi have been wary of China’s attempts at helping resolve Nigeria’s security issues under the guise of protecting its commercial interests. These sentiments highlight the fact that Nigeria needs to view China with the same scepticism as it does the west because China is just as capable of economic and political colonisation.

 

How deep-rooted are these interests?

However, Chinese interest in Nigeria is not as deeply rooted as pundits imply. China does not import much oil from Nigeria, preferring to rely on shipments from Russia, Venezuela, and even Angola. Moreover, Nigeria’s relationship with China seems to lack the strategic depth of other relationships.

In 2013, Chinese President Xi Jinping announced China’s One Belt and One Road initiative (BRI), an unprecedented road and maritime infrastructure development initiative to boost trade. Earlier this year, Nigeria joined over 65 countries in signing up for the Chinese-sponsored initiative, but there are as yet no direct trade routes through Nigeria in the BRI. As a contrast, in East Africa there has been the construction of a railway connecting Ethiopia and Djibouti and an internal railway in Kenya. These kinds of projects use Chinese financing from financial institutions such as EximBank (who funded 90% of the Kenyan project) and China Merchant Holdings Ltd with plans to potentially extend this line into Uganda and Rwanda.

The boring reality is that China’s strategic interests in Nigeria are still maturing and do not fit cleanly into existing narratives. Nigeria’s position as a major importer of Chinese goods is potentially more attributable to the effects of globalisation and the size of the country’s consumer population than anything else. No simple characterisation—whether sugar-coated Chinese official statements or critiques alleging ulterior motives and economic exploitation—adequately describes the two countries’ evolving relationship.

Fikayo Akeredolu

Fikayo Akeredolu

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