Trade as a pivot in Nigeria-China relations

July 6, 2017 | Autor: Olanrewaju Sosan | Categoria: Economic History
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Abstract

China has been actively involved with Nigeria through three phases: the ideological enticement of the pre-independence and independence period, the era of widespread diplomatic recognition in the 1970s, and the economic partnerships established in the late 20th and early 21st centuries. Of these three periods, the closest Nigeria has been with the world giant has been within the later stages, whereby China not only overtook the European Union and United States as Africa's biggest trading partner, but also diverted her over-reliance of Western aid and partnerships that have straight jacketed the continent to bending to Western whims and caprices. Nigeria, as the biggest African nation, has keyed into Chinese partnerships, and the effects have been remarkable. This paper examines trade as a critical area which the Nigerians and Chinese have worked together with each other and gained immensely from. The paper focuses on the impact trade has brought on Nigeria's economy over the years and areas which the Chinese investments have opened up new frontiers in South- South Cooperation. The paper would also seek to address the sincerity of purpose between Nigeria and China, and how the partnership between both countries would be weighed against the 'win-win' philosophy as espoused in China's foreign policy. China's unquenchable thirst for energy sources, the trade imbalance and its implications to objective trade relations and the West's rhetoric that China's real intentions in Africa is a façade concealing her goals of creating an empire in Africa are also areas this paper would speak to. We hope to reach a conclusion that defines the true relations the Chinese have with Nigeria, and seek ways in which we can strengthen our policies against unfavourable economic incursions from our partners from the East.

Introduction
International economic relations have always been an important component of a country's foreign policy, and this is always reflected within the framework of policies. The economic wellbeing of a nation's citizens is ultimately the hallmark of a successful government policy. If there ever was a constant parallel of relations between Nigeria and China, it was within the ambits of trade relations. Trade relations predated political independence, formal diplomatic recognition, and over time became a constant in the changing patterns of relations between both countries. This pattern was observed in during periods of ideological contrasts, the change in government, the Nigerian Civil war, the return to civilian rule. All these periods have seen the consistent and ever increasing trade relations between both countries. Although, the propellers of this pattern were mostly due to internal transformation of both external influences and the forces of globalisation, the relations between both nations have soared over the years into a symbiotic rather than parasitic one.
While China's economy with a GDP of over $1.7 trillion and accounting for over 6% of the world trade, Nigeria appears to be the next surprise of an emerging global economic renaissance. Bilaterally, trade between both nations moved from $2 billion in 2000 to $18 billion just ten years later. Nigeria was also a top destination for Foreign Direct Investments from China. With a booming population of about 140 million, and natural resources to gain from, the relations overtime improved. However, the reality is that there are trade imbalances mostly favouring the Chinese, with the latter's exports representing 66.7 % of the bilateral trade total in 2000 and 87.3% of the total in 2010.

Evolution of Trade Relations between Nigeria and China
China's trade relations with Nigeria is almost as old as the country itself, as trade links have been traced as far back as 1953. Although not in the same league as the Western nations, trade between Nigeria and China was constantly increasing despite ideological differences. The Chinese Economic counsellor reached out to Nigeria from Egypt in 1957. A Chinese delegation visited Nigeria in April 1961 and that visit was reciprocated by a Nigerian delegation led by the then Minister of Finance Chief Festus Okotie-Eboh that same year. The visit regarded as an important step taken by the Federal government to reduce Nigeria's dependence on Western countries and to raise the volume and value of trade with Eastern countries and China. This proved fruitful, as both nations increased trade relations. Post-independence trade and investment by China was negligible, by Western trade standards, although Hong Kong and Taiwanese entrepreneurs had established a manufacturing presence, especially in textiles. During the early periods of ideological differences, imports from China stood at $10 million and increased to $15million dollars in 1969 and to $19.68 million in 1970 by the end of the civil war. With the formal recognition of China in 1971, Nigeria and China began in earnest the beginning of an economic relationship.
The major imports from China ranged from light industrial products and natively produced hardware while Nigeria's exports were cocoa beans and cashew nuts. By August 1972, a six-man delegation by Professor Adebayo Adedeji arrived in Beijing. A trade agreement was signed and both agreements were described as the building blocks of economic relations on a grand scale. Nigeria exported $14 million worth of goods to China between 1972 and 1974 and provided a market for Chinese goods worth $249 million. By 1975 and 1976, imports from China amounted to $69.86 million and $140.87 million while Nigeria's exports for the years combined amounted to $8.85 million. In 1977, imports stood at $146 million while exports to China stood at $11.8 million.
According to Professor Ogunsanwo, the uniqueness of the economic cooperation agreement lay in the fact that it was open ended. The nature of the agreements ensured was such that there was no limit to the number of projects Nigeria could call on the Chinese to implement in the country. There were relatively little Nigerian demands on Chinese resources compared with what other African governments succeeded in extracting in the early 1960s. The 1979 Nigeria-China dialogue was also key to defining the trade relations between Nigeria and China. However, internal changes within both countries changed the economic relations between both countries.

Economic Reforms and the Changing Patterns of Relations
When in 1979 the then General Obasanjo made history stepping down as a military leader in favour of an elected civilian government, China was itself struggling to reap the first fruits of its own reforms initiated by the legendary reform leader, Deng Xiaoping. China at this point was in the process of revolutionising their economy by initiating reforms that touched agriculture, law, education and most importantly the economy. The Chinese economy before 1979 was in dire shape, crippled by the unrealistic and idealistic policies implemented by the enigma, Mao Zedong. After reeling from a decade of stagnation during the Cultural Revolution, China needed a new, practical plan that delved away from the Soviet-styled economic system.
Perhaps then, the most important change in China was the new openness to choose policies and strategies that not only defied the existing system of Maoism, but one that met the pragmatic tests of practicability and originality. This was exemplified by the leader of the Chinese Communist Party, Deng Xiaoping, who unveiled his vision at the Third plenary session of the 11th committee of the Chinese Communist Party in December 1978. The path to China's economic development was through series of experimental and yet result oriented reforms as orchestrated by Deng Xiaoping. Deng's plan was to lead the country down a road of gradual and incremental economic reforms, leaving the state apparatus intact, while slowly unleashing market forces. In this quiet revolution, China became a sponge of ideas that catapulted her from a developing third world nation into an industrial powerhouse. This also had tremendous impact on the new relations with African states.
The period of 'Four modernisations' saw a reduction in Chinese influence in Africa and a more concerted look towards the West. With trade liberalisation, China transformed its strict socialist system to a more purpose driven State Capitalism. However, after the Tiananmen Square incident, China refocused its beam to Africa. According to Mathias Agri Eneji et al, the three strategies of China's international trade development since 1979 were:
From 1979 to 1991: The initial stage of opening-up. The government incubated market economy initiatives by decentralization, and introducing international competitors by attracting FDI, developing an export-oriented economy mechanism by regional opening up.
From 1992 to 2001: A critical stage of establishing an export-oriented economic mechanism, based on the market.
From 2001 until 2010: this is a new stage for establishing an open economic mechanism, which is consistent with international trade standards.

On the other hand, Nigeria experimented with her own policies as the 1980s saw the International Monetary Fund (IMF) and the World Bank introduce a new process of fiscal responsibility, stabilisation and accountability. This process revolutionised the angle development was approached internationally and defined the role of the state and the importance of the free market. This new approach to development was the Structural Adjustment Programs. Nigeria bought into these plans, but with the high level of corruption in the systems, the outcomes of the policies created deep wounds in the economy that are yet to heal.
All the same, the programme did have significant impact in economic policies geared toward international trade. The desire to liberalise the economy resulted in the removal of tariff and trade barriers and an influx in cheap imported goods, which created a healthy environment for increased economic interactions with other countries especially in the non-oil sectors. These were further defined by the Washington Consensus; a term coined in 1989 by the economist John Williamson to describe a set of ten relatively specific economic policy prescriptions. The consensus constituted the "standard" reform package promoted for crisis-wracked developing countries by Washington based institutions such as the International Monetary Fund (IMF), World Bank, and the US Treasury Department. However, the Washington Consensus' path were not properly implemented, making the African nations, Nigeria included, to change focus to the greener grass of their East Asian neighbours.

Trade in the New World Order
The internal dynamics of both Nigeria and China created the platform for the furtherance of trade. The volume of trade between Nigeria and China continued to grow at low levels until rapid growth turned China in 1993 from a net exporter of crude oil to the second-largest importer of crude oil in the world. Thus, with a battered international image and economic sanctions in place, the Abacha administration looked east and sought solace with China. Abacha initiated contact with the Chinese government early in his rule, and in 1993, the China-Nigerian trade volume surpassed $100 million. The Nigerian–Chinese Chamber of Commerce was founded in 1994, alongside the Nigeria- China Joint Commission. According to Victor Chibundu, the Nigeria – China Joint Commission is the instrument for execution of bilateral trade, economic and technological cooperation between both countries. This commission is a concerted effort of the Ministry of Foreign Affairs in collaboration with the National Planning Commission with the statutory responsibility for coordinating all aspects of the relationship.
The Joint Commission evolved from the agreements on trade signed in 1972 and 1981. The commission was set up to examine the possibilities of expanding cooperation in trade, agriculture, water resources, power and steel , transport, joint venture projects, promotion of investments and protection, technical cooperation amongst developing countries. The China Civil Engineering Construction Corporation (CCECC) won a $529 million contract to rehabilitate the Nigerian railway system in 1995, and the former premier of China's State Council, Li Ping, visited Nigeria in 1997, signing protocols relating to power generation, steel and oil. CCECC never did rehabilitate Nigeria's railways, Ping's protocols were barely implemented, and the deals were allegedly brokered with the personal interests with the Abacha family. The Abacha administration however did launch the Chinese influence into Africa, and with the second coming of Chief Olusegun Obasanjo to power, relations soared between both countries.
The first ministerial conference of the Forum on China–Africa Co-operation was held in Beijing in October 2000. This multilateral meeting brought to the forefront the new trend of China relations with African nations. The aftermath saw the contract award to CCECC tender to build 5000 housing units for athletes participating in the eighth annual All-Africa Games in Abuja, which were built. In 2001, the two countries signed agreements on the establishment of a Nigeria Trade Office in China and a China Investment Development and Trade Promotion Centre in Nigeria.
At the Chinese Communist Party's Sixteenth Congress in 2002, the leadership announced a new strategy of encouraging Chinese companies to "Step Out" into the global economy not only through exports, but also by investing overseas. This policy reform was perceived to be a necessary complement to the successful implementation of the inward investment and export policies of the 1980s and 1990s, and as part of the ongoing reform and liberalization of the Chinese economy. Nigeria-China relations therefore intensified in arguably the closest phase during Obasanjo's second term in office (2003 to 2007). President Hu Jintao and Prime Minister Wen Jiabao of China both visited Nigeria during this period, and Obasanjo went to Beijing twice. The intergovernmental Nigeria-China Investment Forum was founded in 2006.
A key theme in Obasanjo's policy with China was the 'Oil for Infrastructure policy', which was aimed at improving the level of Infrastructural developments with oil payments rather than the traditional loans that have always been used. Nigerian state governors also began leading delegations to China — seeking investments, aid, and development partnerships — in the belief that increasing ties to China could significantly benefit their communities. This led to a number of loan facilities granted to the governors especially with developmental projects. Chinese MNCs won significant new contracts in Nigeria during this period, particularly in construction, telecommunications, power and transport, while the volume of Chinese manufactured goods exported to Nigeria rose dramatically. By the end of 2008, according to Chinese sources, total Chinese investment in Nigeria stood at $6 billion.
The government of Umaru Yar'Adua (2007-2010) and his strong support for the 'Rule of Law' reviewed many of the previous deals with China, especially the Oil for Infrastructure deal. The proposed rehabilitation of the Lagos–Kano railway and the construction of the Mambilla power station were also placed on hold, alongside the fate of the Kaduna refinery. In addition, an ad hoc committee of the House of Representatives examining the oil deals of the Obasanjo years has recommended that OPL 298 be taken away from CNPC, though it seems content for the company to retain OPLs 471, 721 and 732. The chair of the committee, Igo Agama, has been highly critical of the way in which oil deals were brokered during Obasanjo's tenure, blaming it on the structural deficiencies in his government. This led to either in the suspension or outright cancellation of these contracts. This period was not too cosy for relations between both countries, with few ground-breaking events as witnessed during the Obasanjo years.
Although the Chinese companies were uneasy with the 'oil for infrastructure' setbacks, viewing the developments as 'highly political', they however resorted to relate more with the States, which had lesser bureaucracies. The death of Yar'Adua in May 2010 and the assumption of Goodluck Jonathan into the presidency reignited the trade relations between both countries. At the end of 2010 China declared its new plan for a strategic partnership with Nigeria, featuring political equality, mutual trust, economic win-win co-operation and cultural exchange. The key objectives of the new plan were to:
Enhance political mutual trust to promote strategic co-operation;
Expand co-operation in areas including agriculture, oil, electricity, infrastructure construction, telecommunications and satellite;
Expand cultural exchanges and cooperation in combating various diseases including malaria and bird flu;
Strengthen co-operation in international affairs to promote world peace, enhance co-ordination and human rights, anti-terrorism and peacekeeping efforts and promote South-South and South-North dialogues.


Technological Cooperation
The technological cooperation between the two countries was one of the most rewarding cooperation patterns in the South- South partnership. The impact was first felt within the agricultural sector with the Chinese side agreeing to execute irrigated rice plantations in Itokin in Lagos state, Duro-Egan in Kwara State and Odo-Epe in Anambra state. In line with the agreement on economic, scientific and technical cooperation of 1972, China sent a study group and, as a result, 10 documents were signed. The technological cooperation cut across agriculture, borehole drilling, small industries, civil engineering and medical services. Boreholes were drilled in the Lake Chad basin and 77 in Borno state to help the drought stricken population solve the problem of drinking water from 1977 to 1980.
Chinese experts also trained Nigerian technicians in geology, hydrology, drilling maintenance and repair machinery. Chinese technicians were also sent to Nigeria and trained their Nigerian counterparts, setting up joint ventures in borehole drilling, metallurgy, civil engineering and irrigation in Nigeria. Another prominent player in the construction market, China Geo-Engineering Corporation (CGC), started out digging boreholes in the 1980s and quickly moved on to larger projects. Its contracts include an airport in Kebbi, a water supply system in Gombe, a dam in Sabke and the road from Kano to Maiduguri. CGC's Nigerian branch is the company's largest in Africa, employing more than 200 Chinese staff.
The Nigerian delegation led by Shehu Musa Yar' Adua in April 1979 was meant to exchange views on a range of issues including the restructuring of the Nigerian Railway by Chinese experts especially after the success of the TANZAM Railway project in East Africa. The railways were also one of the major projects worked on by the CCECC in 1995. China Civil Engineering Construction Corporation (CCECC), the biggest Chinese construction company in Nigeria, currently has more than 50 projects underway and has invested more than $10 billion in the country. One of the biggest is an USD 850 million railway linking the capital Abuja with the northern city of Kaduna. The project is partly funded by a USD 500 million loan from China's Exim Bank.
In 1996, the National Electric Power Authority (NEPA) and the North China Electric Power Design Institute (NCEPDI) signed a Memorandum of Understanding in January 1998 for collaboration in the following areas:
The rehabilitation of some power stations
The construction of two new power stations
Assistance in the training of engineers and Technicians of the National Electric Power Authority(NEPA)

The relationship in this area has witnessed the launching of NIGERCOMSTAT-1, Nigeria's first communication satellite in early 2007. One of the most prominent communications collaborations between China and Nigeria is the NIGCOMSAT-1 satellite. In 2005, state-owned China Great Wall Industry Corporation outbid 21 international competitors to win the contract to develop and launch sub-Saharan Africa's first communications satellite. Funding for the project included $51 million from the Nigerian government and a $200 million load from China Exim Bank. The NIGCOMSAT-1 blasted into space in May 2007. With a life expectancy of 15 years, the satellite was expected to expand service and lower costs on everything from telephone calls to internet connection and GPS navigation. It was also an important milestone for both countries.
An MOU on the Provision of National Information Communication Technology Infrastructure Backbone between the Federal Ministry of Science and Technology and Huawei Technologies was signed. In recent years, Nigeria has become one of China's most important telecoms market. The two largest players in the country are the state-owned Zhong Xing Telecommunication Equipment Company (ZTE) and Huawei. The key advantage of the Chinese companies is their competitive pricing. Huawei's prices are 5 to 15 % lower than its chief international competitors, Nokia and Ericsson are. ZTE's prices are 30% to 40% lower than European telecom companies are. The Chinese inroad via this route is noticed with communication giants such as MTN, switching their network providers from Ericsson to Huawei.

The Energy Drive in China-Nigeria Relations
As a member of OPEC, Nigeria is the largest oil producer in Africa and the eleventh largest producer in the world. Nigeria is a major oil supplier to both Western Europe and the US, producing roughly 2.5 million barrels per day. Nigeria's proven oil reserves are approximately 35.2 billion barrels. This makes this West African nation a perfect harvesting site for China's choking energy drive, contributing about 75% of Chinese FDIs in 2005. A Memorandum of understanding (MOU) for cooperation in the field of petroleum was first signed in 1992. In 1993, China became a net oil importer, and energy demand and import volumes significantly exceeding reported GDP growth. In 2003, China's imports of oil increased 30% over 2002, surprising global energy analysts and Chinese economic planners alike. That same year, China surpassed Japan to become the second largest importer of petroleum after the United States. By 2005, Chinese oil imports were at 7million bpd. To help meet this demand, China invested heavily in oil exploration, extraction, transport and processing in Africa in order to "lock up barrels" at the source through the China National Corporation (CNPC).
Initially, the Chinese expressed interests in purchasing Nigerian crude oil for blending purposes and participating in petro-chemical industry. Until courted by Obasanjo's government to acquire their own Nigerian oil assets, China and other Asian countries accessed their oil exclusively through long-term contracts and purchases on the spot market. SINOPEC had annual contracts with the Nigeria National Petroleum Corporation to supply 100,000 b/d, while PetroChina has had annual contracts worth 30,000 b/d.
In Olusegun Obasanjo's second term in office, he brokered a deal with the Chinese known as 'Oil for infrastructure' which was based on the establishment of vital infrastructural projects in exchange for Oil concessions. In July 2005, PetroChina finalized a deal reported to be worth $800 million with the Nigerian National Petroleum Corporation to purchase approximately 30,000 barrels of oil per day for five years. In January 2006, the Chinese state-owned China National Offshore Oil Corporation (CNOOC) acquired a 45 percent stake in a Nigerian offshore oil and gas field reported to be worth more than $2.27 billion. The company subsequently promised to invest, additionally, up to $2.25 billion in field development. In addition, China has won a license to operate four of Nigeria's oil blocs as part of wider package involving a commitment to build a hydro power station. This effective gave China the biggest investment foray into Africa, and gave the corporation 945% stake in an offshore oil field, a partial control of Nigeria's oil field that has a capacity to produce as much as 180,000 barrels per day. China is currently reported to be considering $7 billion in investments in Nigeria, covering a wide variety of sectors.
In 2006, SINOPEC took a 29% stake in bloc 2 of the Nigeria–São Tomé Joint Development Zone and in the same year, CNOOC paid $2.3 billion for a 45% stake in an oil mining licence (OML 130) in the lucrative Akpo offshore field. Also in 2006, CNOOC paid $60 million for a 35% working interest in OPL 229, and announced its intention to invest $1.5 billion there, financed by China's export credit agency SINOSURE. In 2009, the China Petroleum and Chemical Corporation, also known as SINOPEC, purchased Canada's Addax Petroleum, one of West Africa's largest independent oil producers for 7.2 billion.

Figure 1:

Source: UN Comtrade, http://comtrade.un.org

The Manufacturing Sector
The manufacturing sector is one of the most vital sectors in any economy. This sector is of immense importance to Nigeria, although its contribution is a mere 4% of its GDP. When compared to the energy sector, this is a very paltry sum for a nation that aims to be the top 20 economies by year 2020. Western firms have dominated this sector for decades. Chinese investments in the manufacturing sector could be traced to Hong Kong and Taiwan, with a specialized interest in the textile sector. In 1986, export of China's textile and clothes surpassed that of oil for the first time, changing China's export structure from resource product to labor-intensive manufacturing like textile and clothes. In 1995, exports of mechanical and electronic products surpassed that of textile and clothes, changing China's exports structure from traditional products to modern industrial products. Basically, processing trade essentially is an effective combination of international capital and China's cheap labor cost. The textile investments were particularly in Kaduna, taking advantage of the then-plentiful northern Nigerian cotton crop and the city's well-functioning urban infrastructure and electricity supply.
Today, however, Nigerian cotton yields are the third lowest in the world, with only Mozambique's and Uganda's worse off, and the national output has declined substantially. Kaduna's infrastructure is much decayed too, as is the national transport network; credit is reportedly barely available for manufacturers; and national electricity output is, as we have seen, hugely inadequate. In short, almost all Nigeria's previous comparative advantage in textiles has gone. At the same time, in recent years, domestic textile manufacturers have been blasted in recent years by intensifying international competition, particularly from China. Many Nigerian textile factories, including Chinese-owned ones, have been forced to close and there have been substantial job losses. Textiles have lost their position in Nigeria's main manufacturing industry, to be replaced by tanneries.
One of the most successful of the Hong Kong Chinese manufacturing companies in Nigeria is Lee Enterprises in Kano and employs a large Nigerian and Chinese workforce, with Chinese workers living on the premises. The factories, which have their own dedicated power supply and manufacture plastics, steel and ceramic tiles, and are also said to export hides for 'Italian' leather shoes. Lee Enterprises also owns a number of apartments in Lagos, some of which are leased to oil companies, and the up market Golden Gate Chinese restaurant in Victoria Island, which has a very popular casino and is said to be a multi-billion dollar enterprise.
Yet another long-established Hong Kong Chinese manufacturing company is WEPCO, which specializes in roofing sheets and furniture, growing the wood it uses for furniture on its own Nigerian plantations. While these companies may be the best known Chinese manufacturers in Nigeria, there are hundreds of other smaller ones established in a multitude of sectors, according to the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), which has described the Chinese contribution to the Nigerian manufacturing sector as 'immense'. According to the Manufacturers Association of Nigeria (MAN), most of the new international manufacturing entrants into Nigeria over the past 15 years have been Chinese, with a particular concentration in food and beverages, plastics, pharmaceuticals, steel, and cement.
In August 2008 it was announced that a new NGN 42 billion ($0.3 billion) cement factory with an anticipated capacity of 1.5 million tons per year was to be built in Sokoto, as a joint venture between China's Zhonghao Overseas Construction Engineering Company and a Nigerian company called Loratt Capital. Zhonghao owns 55% of the joint venture's equity, and the factory is being 90% funded by Exim Bank. The company has said that all the technology for the factory will be Chinese, as will the construction and technical management, until Nigerians can be trained to take it over. In an even bigger deal, in early 2008 China's SINOMA International, a subsidiary of Hong Kong-listed China National Materials Company, signed a $3.3 billion agreement with Nigeria's powerful Dangote Group to build nine cement plants in Nigeria, the Democratic Republic of the Congo and Tanzania. But in December 2008 Sinoma and Dangote suspended five of the projects, worth around $2.5 billion, leaving four contracts worth $689.54 million. The reasons appeared to be deteriorating global economic conditions and, it has been reported, Chinese concerns at a deterioration in the security environment in Nigeria. One of the most significant of the more recent Chinese retail ventures in Nigeria is the Chinatown in Lagos, the country's commercial capital. This was established in 2001, initially in the city's increasingly upmarket Ikoyi area, and remained there until required to move to the far less salubrious quarter of Ojota, following complaints by Ikoyi residents. Chinatown consists of about 120 shops selling a range of Chinese manufactured goods, though mainly clothes, shoes, fashion accessories and toiletries, and a handful of Chinese medical practitioners, enclosed by high, bright red walls. Lagos residents have reported that up until 2007 Chinatown was extremely popular and thronged with people. In 2007 and 2008 there were series of raids on Chinatown shops by the police and customs authorities, resulting in large quantities of merchandise being confiscated on suspicion of smuggling or counterfeiting. The raids had a decidedly negative impact on Chinatown, and trade there today, while still respectably busy, is reported to be a fraction of what it used to be.




Foreign Direct Investments
The major impact of the trade relations is the flow of Foreign Direct Investment. As one of the major propellers to any developing economy, FDIs have been an essential part of the success story of the East Asian economies. China caught up with this by attracting the required foreign direct investment, which was crucial to economic growth. Although foreign direct Investments were alien to communist societies, therefore China was before then was politically unsuitable for investment. However, determined to follow the footsteps of the East Asian countries, China used the frameworks of reforms to lure foreign investments, creating four free trade zones; Zhuihai, Xiamen, Shantou and Shenzhen. The provinces were given autonomy to promote exports. China's open-door policy was an integral part of her economic system reform as foreign technology and manpower were brought to help modernize the Chinese industry. The same idea was spread with the Beijing Consensus, and also raised at the Chinese Communist Party's Sixteenth Congress in 2002. Chinese private FDI is composed of agro-allied industry, manufacturing and communications sectors. In 2005, the official record by Nigeria was $1.88 million FDI inflow from China.
Foreign Direct Investments have a host of advantages including augmentation of domestic capital, transfer of technology, knowledge and skills, promotion of competition and innovation, and enhancing export performance. These must be weighed against other issues such as anti-competitive and restrictive business practices, tax avoidance and abusive transfer pricing, volatile flows of investment and related payments deleterious for balance of payments, transfer of polluting activities and technologies, and excessive influence on economic affairs with possible negative effects on industrial development and national security. Nigeria has been ranked second next to South Africa among the ranks of African host counties for Chinese Foreign Direct Investment (FDI) between 2003 and 2009. Chinese FDI stocks in Nigeria totalled $1.03 billion in the period, while FDI stocks for the continent were $9.3 billion. FDI doubled from $3 billion in 2003 and doubled to $6billion just three years after. The share of oil and gas sector was about 75%. The developments in the non-oil FDI is also significant as this component increased from about $0.3 billion in 2003 to about $1.7 billion in 2005. Three related types of efforts explain the observed positive developments: change in FDI regime; second, privatization programme of the government; and third, the aggressive drive of government in attracting FDI into the country. The recent developments notwithstanding, there is a huge investment gap in the development of the Nigerian economy and the required investment can only be expected after the investment climate has improved.
A 'WIN-win' Partnership?
China claim they pursue favourable trade relations with Nigeria, however on a much closer look, the disparity between both countries is quite large. China has been viewed as the 'last colonialist' in Africa, making the return of China an unnerving situation. China's ability to attract markets has been primarily due to manufacturing as a low-cost producer. This is attributed to a combination of cheap labour, good infrastructure, relatively high productivity, favourable government policy, and a possibly undervalued exchange rate. China is widely criticised for manufacturing large quantities of counterfeit goods, and in 2005, the Asia Business Council alleged that the counterfeiting industry accounted for 8% of China's GDP at the time. These counterfeit goods have flooded the Nigerian market, and have been a source of concern to the Standards Organisation of Nigeria.
The issue of trade imbalance has also been one of the most obvious tests in the relations between Nigeria and China. The issue of trade imbalance was raised initially during the tenure of General Olusegun Obasanjo in the late Seventies. In 1978, the Nigerian government was uneasy about the disparity in trade with China in view of the declining foreign reserves in 1978. The visit of General Yar Adua and the foreign minister, General Henry Adefope in Beijing to begin discussions with Chinese officials on the problem of bridging the yawning gap in the trade figures and the non-effective utilisation of the economic and technical cooperation agreement signed between the two countries in 1972. This expanded the scope of trade to other sectors such as agriculture, industry and trade. This issue was also revisited in 2001 by the foreign policy think tank; the Nigeria Institute of International Affairs.
The Chinese exports to Nigeria reached $540 million and imports from Nigeria amounted to $307 million (mostly from Oil) was considered unsuitable. Also the relations between both countries saw the total value of joint venture projects estimated at $10 million. This was quite a paltry sum when compared with the $6 billion foreign investments that China had at the turn of the century. Thus, a hefty trade imbalance has not only persisted but also intensified. Chinese exports represented 66.7 % of the bilateral trade total in 2000 and 87.3% of the total in 2010. The demand for energy was also on the rise, questioning the real impact of China in the Nigeria. Around 87% of Nigeria's exports to China are oil and gas products. China, by contrast, exports a diversified range of goods to Nigeria, most notably machinery, equipment and manufactured commodities. The figure below tables the volume and the balance of trade between both countries.
Table 1 (A): Summary of Nigeria's Trade with China From 1990 – 1996 (N)
YEAR
EXPORT
IMPORT
VOLUME OF TRADE
BALANCE OF TRADE
1990
44,870,000
1,030,633,000
1,075,503,000
-985,763,000
1991
21,073,000
659,302,000
680,375,000
-638,229,000
1992
24,619,341
5,448,545,779
5,473,165,120
-5,423,926,438
1993
1,244,220
6,057,216,106
6,058,460,326
-6,055,971,886
1995
325,329,674
10,989,908,928
11,315,238,602
-10,664,579,254
1996
39,360,000
538,289,053
5,328,149,053
-5,349,429,053

Table 1 (B): Summary of Nigeria's Trade with China from 2006 – 2010 ($)
YEAR
EXPORT
IMPORT
VOLUME OF TRADE
BALANCE OF TRADE
2006
4,133,638
3,161,115,481
3,165,249,119
-3,156,981,843
2007
873,330,328
4,910,821,679
5,784,152,007
-4,037,491,351
2008
268,092,957
4,292,323,788
4,560,416,745
-4,024,230,831
2009
712,921,109
5,999,531,626
6,712,452,735
-5,286,610,517
2010
1,440,809,162
7,324,398,627
8,765,207,789
-5,883,589,465
Source: Compiled by Author.

The trade imbalance questions the real intentions of the Chinese in Nigeria. This has been the argument of Western Scholars, however by history and reality, the West were not better off anyway. Therefore, Nigeria keeps being charmed by China with favourable trade relations, advocating that her relations are propagating developments in the West African nation. However, while the Nigeria-China relations is said to place food on the table, the pertinent question remains that on whose table does it go?
China has a huge developing population, one that has always been forging for better living standards. China is actually in Africa for her own benefits also, and she places her national interests above every other motive, and this reflects on every policy she formulates. The Chinese could be said to have a strong character build, but they are also masters of the game of corruption. The railway contract with Nigeria in 1995 was one of the white elephant projects that received all the media attention but left unimplemented. It was widely claimed that the contract was another way of siphoning the nation's wealth into the coffers of the Head of State.
The Way Forward
There is no doubt that China has over the years maintained healthy relations with Nigeria, even at periods of international isolation during the Abacha years. Be that as it may, the encroachment and unbridled inroads China is embolden to take makes it necessary to put some checks in place in curbing the excesses of Chinese corporations. In seeking a way in reducing the imbalance of trade, corrupt collaborations between corporations and Nigerian officials, a number of steps must be put into place.

Redefinition of Nigeria's Policy on China
Forging a 'Chinese policy' is one of the weaknesses of African relations with China, and Nigeria is not immune to this. A coherent Chinese policy is one that has to be factored. The Oil for Infrastructure deals for instance had implications not just for the present but also to generations after. While Nigeria has, for years been indebted to the West with her money, she would be indebted to China with her resources. With the use of the individual level of analysis in international relations, the Nigerian design of Chinese policies have been propelled by the leaders in power, as the contrast between Balewa and Gowon, the Obasanjo and Yar Adua had shown. According to W.O Alli, one of the biggest challenges confronting Nigeria- China relations is the absence of an articulate and clear strategic vision for its socio-economic development.
A well-articulated philosophy and consistent policy framework must therefore be laid out in order to engage the relations with China. In drafting this, key issues must be integrated into the framework such as the limits of the incursion of the Chinese into Nigerian economy, the insistence of quality as against quantity in trade, and the rational use of diplomacy in actually luring and unending competition for the Nigerian market. China's influence must not shift the nation's gaze fully to the East, as with time the Chinese would also begin to show features that resemble that of the West. Although increasing relations are always welcome, they must be guided and clearly weighed by mutual benefits. The policy of non-intervention as a cardinal foreign policy of the Chinese further attracts countries to her web.
However, a number of key events have tested the stand of China in upholding this principle. China had shown during the Nigerian Civil war that she could take sides and probably even support the side she camps with. In the 21st Century, a repeat of the Cold war is already in the making, and China is increasingly gearing itself for the contest. The gentle rise of China in a couple of years might become more aggressive, with limited resource supply and increasing demand by Chinese industries. The case of the South China Sea disputes and other Island disputes have shown that China might be more aggressive in its stand on issues that pertain to her own growth.

Modelling a Framework for China
The need for defining a framework in dealing with China is necessary in reducing the negative aspects of Nigeria's relations with China. This research has shown that one of the greatest challenges of African leaders is articulating effective policies towards China. China thrives on the disunity of Africa, their inability to work as one to challenge any negative aspects of her incursion. Although Nigeria is a big country, the reality is that she is still dwarfed economically and demographically by China. Therefore, there is a need for the initiation of concise trade agreements and reviews of existing ones. Also already signed agreements must be honoured both by Nigeria and by China. Also, the instrumentality of multilateral organizations such as the World Trade Organization and the International Labour Organization, alongside multilateral agreements the LOME conventions and Cotonou agreements alongside the African Growth and opportunity Act of the US and the EU-ACP Agreement are all necessary in checkmating the excesses of China. The United States has used the platform of the WTO to question some of the trade practices of China, and Nigeria must do the same when threatened by some of China's questionable practices.
Furthermore, the instrumentality of Regional integration is also necessary in having a stronger economic stand on China. By using the instrumentality of the Economic Community of West African States and the New Partnership for African Development, Nigeria can effectively have a much stronger advantage than it presently has alone. In time, negotiations should be placed on the ECOWAS negotiation table rather than on the Federal or even State level in Nigeria. Nigeria must therefore use this regional platform to gradually improve her own goal of becoming the new China of Africa. Therefore, production is of the essence, as Nigeria needs this platform to reach out to West Africa and the rest of Africa.
The establishment of the Lekki Free Trade Zone could however be a starting point in the realization of Nigeria's goal of reaching out to West Africa. The LFTZ has a long-term aim of becoming the new Shenzhen Trade Zone, reducing the cost of shipping goods from China and also flooding the whole of West Africa with cheaper goods. This also helps with the goal of regional integration if successfully carried out, although the short life span of equally ambitious projects by Nigeria readily comes to mind. However, the already existing Chinese companies too have been sources of concern, as the labour issues, segregation and other vices abound, therefore reiterating the need for the partnership with multilateral organizations.
Nigeria must also become a more pro- active in learning more about the Chinese than the reverse. China has invested a fortune in seeking the much-needed information about Africa, and Nigeria must do the same. Therefore, there must be a need increase the learning of Mandarin and also sponsor a number of scholarships to China and at the same time inviting Chinese nationals for exchange programmes in Nigeria. In other words, we must become as inquisitive about the Far East as the Chinese are about Africa. The growing Nigerian population in the Chinese region of Guangzhou is also a necessary link in understanding much more about the Chinese.
In line with the above, there is need for more research, conferences and seminars by the NIIA on China and indeed all Asia. This would be of essence in better understanding the Asian model and fashioning out policies to aid better relations between Nigeria and China.

Constructing a Framework on Dealing with China
A pattern must also guide Nigeria's relations with China, and must be presented in the short term, medium term and future objectives that must be adhered to strictly. The world has continued to shrink into a global village and Nigeria cannot afford to fold its arms and allow opportunities pass her by. The reality is that Nigeria needs Foreign Direct Investment to aid her economic growth rather than just trade, and China is capable enough to meet this need. At present, China's major influence on Nigeria is on basically on trade and resources especially Oil, with their major manufacturing inroad- the textile industry-in comatose.
Therefore, the ability to attract FDIs to Nigeria, with several mitigating factors and security challenges is not as easy as it looks as several grey areas in the Nigerian system have limited the entrance by would be investors. With China coming to the fore, raising the policy bar could be a deterrent, therefore, incentives are meant to be the attraction to the FDIs in this stage. These include, amongst others, curbing corruption, strengthening institutions, development of infrastructure, power generation, multiple and safer means of transportation and a review of harsh investment laws such as the Land Use Act. At this stage, the red carpets are meant to be rolled out and investors allowed access to the Nigerian market, with higher preference to the manufacturing sector. Furthermore, investing in Nigeria must be with an ability to finance at least 60% inflow from the parent country, rather than using loans from Nigeria, although Exim bank has footed present investments from China.
The medium term objective would be structured in a Stabilization stage. There is a need to create a semi-permeable membrane around the elements of foreign investment, especially with China. These include strengthening institutions such as the Standards Organization of Nigeria, the National Agency of Food and Drugs Administration and control, the Nigeria Customs and Immigration. These institutions would maintain the adherence of regulations and standards by the Chinese. As a result, companies are to be curtailed from excesses, and regulatory agencies must be empowered to enforce standards.
The Long-term objectives must become more of a collaboration stage, with the companies investing in the Nigerian Stock exchange rather than engage in capital flight after a specific number of years. At this stage, it is expected that the successful businesses would have gained a foothold would have gained into the lucrative Nigerian market. Thus with production on the increase, Nigeria would be able to break into the West African market.
A very good instance of this pattern is the communication sector, whereby a number of operators were at first given free hand, and then a strong institution, the Nigerian Communication Commission, gradually tightened the leash especially with the massive investments in capital the companies invested. The short term plans could be split into two phases; the first by creating a conducive environment and then commence the enticement phase. However, all these would be of little or no relevance without the impact on the life of the people.

Conclusion
Questioning China's trade inroad into Nigeria is a foregone affair, as the Red dragon from the East has finally laid its nest in Nigeria. China's Silk Road was established on the importance to increase trade relations between both nations, and it would be quite unwise to let go of such a massive economic power. However, being at the favourable side of agreements on trade would end up improving the relations between both nations. In questioning the excesses of Chinese firms and trade agreements, we also strengthen our own policies and over time we would be better off. In a final analysis, although as a growing nation we desire strong partners like China in forging a strong economy, we must also not be overwhelmed into signing deals that would unwittingly throw us into years of exploitation. The only way to guard against this is by establishing strong policies that would guide present and future trade relations between both countries.






Endnotes


Alaba Ogunsanwo, China's Policy in Africa (London; Cambridge University Press,1974.), 15.
Victor, Chibundu, Nigeria-China Foreign relations 1960 – 1999 (Ibadan: Spectrum Books Ltd.) 12.
John Cambell, "Who's in Charge, China or Nigeria," Daily Champion, July 5, 2010, 11.
W. O. Alli, The Prospects of Engaging China (Lagos: NIIA publication), 2.
Alaba Ogunsanwo , "Nigeria and China," (Paper presented at a Seminar on China Africa Relations in South Africa , September, 2007),7.
Ibid., 8.
Emmanuel Aziken, "As Chinese President visits, what Lessons for Obasanjo on Reforms?" Vanguard, April 26, 2006, 39.
Mathias Agri Eneji et al., "Impact of foreign trade and investment on Nigeria's textile industry: The case of China," Journal of African Studies and Development 4, no. 5 (July, 2012): 135.
Pat Utomi, China and Nigeria (Washington, DC: Center for Strategic and International Studies, 2008), 40.
Crusoe Osagie, "Nigeria-China Trade Hits$7.76bn," http://www.thisdaylive.com/
articles/nigeria-china-trade-hits-7-76bn/89066/, assessed 05 April 2011.
Chibundu, Nigeria-China Foreign Relations, 1960 – 1999, 22.
Gregory, Mthembu-Salter, Elephants, Ants and Superpowes:Nigeria'a Relations with China, (South Africa: Institute of International Affairs, 2009).
Ibid., 7.
Ibid., 14.
"China Plans New Strategic Partnership with Nigeria," The Nigerian Tribune 21/06/2010, www.tribune.com.ng/index.php/, assessed 02/09/2012.
Margaret Egbula and Qi Zheng, China and Nigeria: A Powerful South-South Alliance (Lagos: the Sahel and West Africa Club Secretariat, 2011), 17.
Ibid., 13.
Chibundu, Nigeria-China Foreign Relations, 1960 – 1999, 22.
Egbula and Zheng, China and Nigeria: A Powerful South-South Alliance, 13.
Marcel Kitisou (ed.), Africa in China's Global Strategy (London; Adonis and Abbey, 2007), 51.
Mthembu-Salter, Elephants, Ants and Superpowes,11.
Onyebuchi Ezigbo, "Nigeria-China Sign $800 million Crude Oil Sale Agreement," This Day Newspapers, July 11, 2005.
Mthembu-Salter, Elephants, Ants and Superpowes,12.
Cambell, Who's in Charge: China or Nigeria,11.
Mathias Agri Eneji et al., Impact of Foreign Trade and Investment on Nigeria's Textile Industry: The Case of China,3.
Mthembu-Salter, Elephants, Ants and Superpowers,18.
Ibid., 19.
Ibid.,20.
Olugboyega A. Oyerantin et al., The impact of China-Africa Investment Relations: the Case of Nigeria, www.aercafrica.org/documents/china-africa-policybriefs, assessed September 05, 2012.
Dan Omoweh et al., Nigeria & China: Bilateral ties in a New World Order, (Lagos: Nigerian Institute of International Affairs, 2005), 25.
Alli, W. O., The Prospect and Challenges of Engaging China (Lagos: NIIA), 5.



















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