Wearing Thin

China’s relationship with Nigeria has faced a battering in recent weeks and new policies will be needed.

In the past month popular protest and federal government criticism have dogged Chinese projects in Nigeria, with questions being raised over Beijing’s wider conduct in the country. Nigeria’s once buoyant textile industry, laid to waste by European second hand clothes and cheap Chinese imports, has repeatedly asked government for support The Manufacturing Association of Nigeria has threatened to picket the Chinese embassy, and President Yar’Adua has rebuked China, warning of the consequences of further dumping in Nigeria’s markets.
Meanwhile China’s flagship infrastructure project on the continent, the $8.3bn modernization of Nigeria’s railways is also on the ropes. The Federal Government suspended the project claiming that it was improperly negotiated under the previous regime and as a result, overpriced. In response the World Bank has quickly stepped in offering a $3bn infrastructure loan to Nigeria. Infrastructure development has generated massive goodwill for China in Africa. Large engineering projects have represented China’s comparative advantage over Western developed countries, as Chinese firms have been able to offer capacity an experience which the West can not. This set back will worry Beijing. The project has faced numerous hiccups, but this most recent breakdown is significant.
China has suffered further blows to its reputation in Nigeria. It was hoped that the launch by China of a Nigerian telecommunications satellite would overcome communications problems, reaching even the most disconnected communities with telephone and broadband, opening business opportunities and the potential for e-learning and healthcare. For China the project represents its emergence as a low cost supplier of high technology, especially for developing countries. 18 months after its launch the satellite had to be powered down this week because of faulty solar panels. This high profile flop will cause huge embarrassment in both Beijing and Abuja as critics and rivals revel in the failure.
China’s interest in Nigerian has been growing since 2005 with the signing of an $800 million crude oil deal between PetroChina and the Nigerian National Petroleum Corporation (NNPC) to supply 30,000 barrels of crude oil per day. In 2006 China National Offshore Oil Corporation (CNOOC) agreed to pay $2.3 billion for a stake in oil and gas fields and China National Petroleum Corporation (CNPC) agreed a further $4 billion deal for the right of first refusal on four oil exploration blocks, paid in the form of Infrastructure project credit.
During tours of the continent, China’s foreign minister Li Zhaoxing and President Hu Jintao showed China’s commitment to Nigeria with visits in January and June 2006, and they were quick to point out the similarities between Nigeria and China. Both have a rich culture independent of the West, both are the most populous nations and regional leaders in their respective continents and both have a history tainted by the influence of colonialism.
A Confucian proverb, ‘have no friends not equal to yourself’, shows the idea behind China’s cooperative approach in Africa. Its non-interference stance has been well documented and criticized, especially regarding its cosy relations with Omar Al-Bashir’s Sudan. Nevertheless it is generally an approach that is celebrated within Africa. Mustafa Bello, head of the Nigerian Investment Promotion Commission, who has visited China seven times, says: “The U.S. will talk to you about governance, about efficiency, about security and about the environment, The Chinese just ask: ‘How do we procure this license?”. Nigerian criticism of China has been over its impolite trading practices, but this is recorded much less often in western news. A recent study suggests that British news sources have generally been content to ignore the trade malpractices of which it is also guilty and has painted China as a violent influence on the continent.
The 2006 China-Africa Beijing summit was revolutionary in its approach, with aid measures unprecedented in Chinese history. Along with $5 billion of preferential loans and buyer’s credit, Beijing also set aside a $5 billion fund to encourage Chinese businessmen to invest in Africa and promised to set up three to five trade and economic development zones. These have proved a great success in Mauritius and it was announced recently that ten were now planned for the continent.
The outcomes for Nigeria were: the $8.3bn dollar railways contract funded by preferential loans backed by the promise of oil rights; the Mambilla power project, hoped to provide 2600MW and almost doubling Nigeria’s electricity production, funded through a loan of $2.5 billion from the Export and Import Bank of China, again oil backed; Chinese firms ZTE, Alcatel Shanghai Bell and Huawei were charged with the extension of Nigeria’s rural telephone network.
Chinese local governments and businessmen poured into Nigeria investing in a multitude of projects such as a cement factory in Enugu state, a sugar processing plant in Zamfara, shoe factories and bus assembly plants.
The Power Holding Company of Nigeria was recently producing only 3000MW where analysts have predicted Nigeria’s need at 50000MW. Nigeria’s power generation problems have lead to frequent black outs resulting in the collapse of a number of industries reliant on expensive diesel generators in order to run their factories. Again Abuja has looked to China to help it reach a target of generating 10,000MW of electricity by 2007. This represents one of many dualities in China’s involvement in the country. Although it is blamed for the destruction of the Nigerian textile industry through cheap imports, it is also providing the infrastructural base which Nigerian industry craves.
Encouraging all this inward investment has been the job of Mustapha Bello, the Executive Secretary of Nigeria Investment Promotion Commission. He has continually trumpeted the value of China’s investment in Nigeria, and the opportunity that Nigeria represents for Chinese investors. His bullishness was evident when in 2007 he said,
Whatever some of their citizens are doing, we must try to find ways of tolerating them and then stopping them from misbehaving. If I come in to work and I give you over $10 billion, then you have to find ways of making me your friend so that I can give additional billions of dollars.
On the 11th of November Bello called for Chinese investors to take advantage of the favourable investment climate in the country. After recent problems with the relationship one might expect that China will be cautious development partner. Whereas other African countries have been grateful for Chinese interest, Nigeria has not welcomed China with the special treatment it is used to. Due to Nigeria’s established relationships with US, British and French oil companies it has not been as reliant on China as Sudan or Angola, countries which did not enjoy the support of Western powers. Not only is Nigeria one of the two largest oil producers in Africa but it is also a regional leader and therefore cultivating a relationship is especially important to both sides.
With the 3rd China Africa Forum scheduled for Cairo in 2009, it will be fascinating to see what measures China takes to strengthen its relationship with Africa, and Nigeria specifically. Professor He Wenping of the Chinese Academy of Social Sciences described it as the next big step in China and Africa policy and predicted wider and deeper involvement. Professor He predicted that China would transfer factories to Nigeria in the medium to long term, but insisted that both sides would have to be committed to such measures in order for them to prove a success.
This might be dependent on the development of the Lekki Free Trade Zone (FTZ) near Lagos, which was boosted recently by the Nigerian Port Authority agreeing to plans for a $6bn deep water port connected to the zone. Chinese companies account for 60% of the ownership of the FTZ with the other 40% owned by the Nigerian Government. It is planned by 2009 to contain power plants, road networks and workshops for manufacturing. For Chinese firms, this represents a safer bet than other projects which are more exposed to Nigeria’s infrastructural problems.
Chen Xiaoxing, head of the Chinese side of the Lekki FTZ, stated their goal is to: “build up a modern Chinese-type industrial city in Lagos under the leadership of the Lagos state government while helping first-rate Chinese enterprises to develop themselves abroad.” The second phase will look to cover 150 square kilometreswith heavy industry manufacturing, chemicals, petroleum processing, pharmaceuticals, automobiles, education, banking and finance sector business, among others. Chen also predicted that the area would eventually supply 300,000 jobs for Nigerians
Job creation is likely to be the greatest challenge China faces in maintaining good relations with Nigeria. The government and populace are increasingly impatient in their demand for value added investment in the country. There is a further free trade zone in Igbesa in Ogun State of which Nigerian Minister of Commerce and Industry, Charles Ugwu said, “We are going to partner with them but we should not close our eyes. We need to work with them and understudy them […] They will produce garments and export to EU, and the US under the AGOA scheme. The issue is managing the relationship and we will manage the relationship”. On the 6th of November it was announced that two new factories would be situated in the zone representing the largest ceramics producer and the largest aluminium smelter on the continent.

It appears that Chinese actors have been sensitive to Nigerian complaints but if troubles persist it might become difficult for either government to justify the relationship.

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