AUG 18 EDITIONEconomy

Nigeria-China Blossoming Economic Romance: An Overview

By Emma Njoku

Nigeria-China relations date back to 1971 when the two countries first established diplomatic relations and subsequently exchanged envoys. The bilateral relations between Nigeria and China were somewhat symbolic then. The period between 1971 and early 1999, however, witnessed minimal diplomatic exchanges, low bilateral trade relations and near absence of Chinese Foreign Direct Investment in Nigeria. At that time, Nigeria adopted a broadly pro-Western policy with traditional development and trade partners, mostly of European and American origin. Western countries then dominated Nigeria’s external political and economic relations.

Apapa Port, Lagos Nigeria
Source: Vanguardnews

The countries accounted for most of the Foreign Direct Investment inflow to Nigeria, they also accounted for nearly all foreign aids, grants and technical assistance given to Nigeria. In return, nearly 90 percent of Nigeria’s exports (mostly crude oil) went to the West. However, the trend began to change at the dawn of the new millennium. To be specific, in October 2000, China hosted the first Ministerial Conference of the Forum on China-Africa Cooperation in Beijing. By all accounts, the conference have laid the foundation and set the pace for a new order which signalled a significant shift in the diplomatic and economic relations of Nigeria  and other African countries with foreign countries. Over the years, China has now emerged as a major development and trade partner of Nigeria and other Africa nations, thus taking the place of European and North American countries in Nigeria’s development agenda. Soon after the Beijing conference, China-Nigeria relations assumed a new dimension, which was characterised by rapid and aggressive economic, cultural, scientific, and educational cooperation, increasing Chinese Foreign Direct Investment (FDI), aids/ grants, technical assistance as well as several state-sponsored training programmesfor Nigerian officials.

Nigeria’s currencies and the Chinese Yuan in display

Nigeria and China have signed several bilateral agreements and treaties. For instance, in 2001, the two countries signed an agreement on the establishment of the Nigerian Trade Development and Trade Promotion Centre in Nigeria. In 2002, the two countries signed an agreement to facilitate the prevention of double taxation and fiscal evasion with respect to tax and income. In the same year, they signed another agreement on consular affairs. Still in 2002, Nigeria and China signed yet another agreement on cooperation and strengthening the Management of Narcotic Drugs, Psychotropic Substances and Diversion of Precursor Chemicals. Also in 2002, Nigeria and China went on to sign the Tourist Cooperation Agreement and in 2005, a  Strategic Partnership Agreement was signed by both countries, while in 2006, Nigeria signed an Economic Cooperation Agreement with Xinguang International Group of China. Apart from these pacts, the two countries have signed several other agreements and memoranda of understanding, and Nigeria has, no doubt, received a lot of technical assistance in the areas of science and technology, military, health and education, among others. In 2006, for example, China provided a grant of 46 million Yuan for Nigeria to combat malaria and train its health personnel in malaria prevention and control procedures. In another development, Nigeria and China signed a scientific cooperation agreement that resulted in the launching of Nigeria’s first communication satellite (NIGCOMSAT) into orbit in 2007.

Similarly, the Federal Ministry of Science and Technology and Huawei Technologies of China signed a Memorandum of Understanding for the establishment of National Information Communication Technology Infrastructure Backbone. Yonghua Ding, Head of Political and Press Unit of the Chinese Embassy in Nigeria, who made the disclosure, also said that China had even simplified its visa application and processing procedures to facilitate the business trips of Nigerian businessmen to China. Available information about Chinese activities in Nigeria points to an increasing economic, social and cultural relations. China has set up numerous state-owned and joint venture companies in the areas of oil and gas, telecommunications, construction, technology, transport, services and education, among others. Examples of Chinese-owned and joint venture companies include Happy Chef Restaurant, Plas Alliance Ltd., Royal Motors and Sun Lung Industries. Beyond that, Nigeria has received a lot of technical and financial assistance from China, particularly in the areas of health, education, military and infrastructural development.

Central Bank of Nigeria; headquarters of Nigeria’s business environments

In  the health sector, for instance, China has been very supportive of Nigeria’s Rollback Malaria Programme via the provision of anti-malaria drugs and insecticide-treated mosquito nets worth about N400 million. China and Nigeria signed a Memorandum of Understanding for the supply of another set of anti-malaria drugs worth N83.6 million. In the area of defence, Nigeria has received appreciable assistance from China, in the form of military training and supply of military hardware. In education, some Nigerian educational institutions have reportedly entered into partnership with the Chinese authorities and educational institutions, with a view to promoting the Chinese culture, language and innovations. For example, Chinese experts are believed to be teaching Chinese language in Nnamdi Azikiwe University (NAU), Akwa, and some other universities. Under the scheme, China has sponsored the training of NAU staff in Mandarin (Standard Chinese) studies in China.

In terms of financial assistance, China Export-Import Bank (China EXIM Bank) and the Federal Government signed a financing agreement of worth N8.36 billion to support Nigeria’s infrastructural development. Besides, one interesting element of Nigeria-China relations is the aggressive move of some Nigerian state governments to garner Chinese cooperation and investments. Guo Kun, the Chinese Consul-General in Nigeria, said: “The ambitious state governments, along with their Chinese counterparts, are cooperating closely to bring about the success of Chinese manufacturing to Nigeria”. In a nutshell, foreign affairs analysts note that China has made indelible impression on Nigeria’s development processes, causing some to wonder about the raison d’etre for the growing Chinese influence in Nigeria. Some cynical analysts try to juxtapose Nigeria-China relations with Nigerian relations with some Western countries, whose relations with Nigeria rather appeared one-sided and exploitative, given the patterns of bilateral trade and FDI inflow to Nigeria. All the same, a ground breaking development in Nigeria-China economic relations is the currency swap agreement between the two countries, valued at Renminbi (RMB) 16 billion (about 2.5 billion U.S. dollars), which was sealed recently. According to Mr Isaac Okoroafor, the spokesperson for Central Bank of Nigeria (CBN), the deal is to provide adequate local currency liquidity for Nigerian and Chinese businessmen, while assisting local businesses by reducing the difficulties they usually encounter in search of third currencies. The idea to diversify foreign reserves was first mooted in 2004.

Nigeria’s President Muhammadu Buhari discussing the naira-yuan swap with Chinese

The CBN then wanted to increase the percentage of Yuan in Nigeria’s foreign reserves from two percent to about seven percent. Nevertheless, the initiative then failed to take off until about two years ago when the CBN Governor, Godwin Emefiele, and the Peoples Bank of China revived the initiative and made it a reality. Since 2014, Yuan, the Chinese currency has trade, as several countries now see it as a global reserve  currency. With the deal, Nigeria became the fourth African country – after Ghana, South Africa and Zimbabwe – to sign on to Yuan for its trading and financial market transactions. Emefiele and his Chinese counterpart, Yi Gang, signed the agreement in Beijing on Friday, April 27, 2018, while some officials of the two apex banks acted as witnesses. Although the deal has elicited divergent views, particularly with regard to the supposed trade imbalance in favour of China, the deal has opened new vistas in mutual international trade and businesses between Nigeria and China. Such sentiments notwithstanding, the CBN team, under Emefiele, had engaged in series of painstaking negotiations, taking into consideration Nigeria’s interests, particularly with regard to giving access to the 41 items, hitherto restricted from accessing forex from the Nigerian foreign exchange window. The deal could not have come at a better time than now, with the country’s exit from recession, impressive Foreign Direct Investment (FDI) through the establishment of the importers and Exporters (I & E) window, resulting in steady reserves accretion.

It is pertinent to note that from 2016 to November 2017, the volume of bilateral trade between Nigeria and China steadily grew by 30 per cent and peaked at about 12.3 billion U.S. dollars. With its exit from recession and impressive foreign reserves stock, Nigeria has become an investment destination to every foreign investor, the Chinese inclusive. In terms of Foreign Direct Investment, total Chinese interests in Nigeria is said to have reached about 45 billion dollars, while the Asian country has financed a total of projects worth 22 billion dollars.

Some observers are, nonetheless, of the view that the currency swap agreement will significantly reduce the strain on Nigeria’s foreign reserves, which are denominated in U.S. dollars, and it is expected to boost bilateral relations between Nigeria and China as well as other Asian countries interested in doing business with Nigeria. Observers have commended the CBN for promoting the sustainable economic growth, adding that the new agreement will facilitate the efforts of the two countries to manage their foreign reserves efficiently.

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