AN ASSESSMENT OF THE POLITICAL, ECONOMIC AND CULTURAL BILATERAL RELATIONS BETWEEN NIGERIA AND CHINA FROM 1999-2007
Chapter 1: Introduction
Since the founding of People`s Republic of China in 1949, China has made tremendous efforts to explore a development road designed for her own needs and suitable to her own national conditions, which was finally summed up by Deng Xiaoping, the architect of the opening-up in 1978. The past three decades have been a critical period for Chinese people to seek harmonious scientific and sustainable development at national and international level to strengthen cooperation and embrace globalization with the world. In its quest to be part of globalization, China- Nigeria established diplomatic relations on February 10, 1971. But the internal crises faced by both countries reduced the pace of economic integration like Nigeria, the trade policy since 1960 witnessed extreme swings from high protectionism from the West in the first few decades after independence and also placed high restrictions on the importation of capital goods that could have enhanced local industries like machineries to boost agricultural production and other sector of the economy[1]. The relation of the two countries grows closer as a result of international isolation and condemnation of Nigeria’s military regimes 1970-1998. While on the other hand, the Chinese open door policy embarked by the communist party in 1978 led by Deng Xiaoping which gives equal commercial and industrial rights to all the nationals also precipitated the economic relations between the two. These cooperative relations which seem to be enjoying a rapid progress are based on the principles of equality respect and mutual benefit, with the friendship and exchanges of visits between the two countries consolidated with the time. Under the framework of the forum on China-Africa cooperation, known as FOCAC which started in 2000, more importantly, with the follow-up actions of the distinction Beijing summit of the FOCAC in 2006, the bilateral relations between China-Nigeria get further boost and enjoy rapid development.[2] China and Nigeria have a couple of unifying characters in common. First of them all, is their natural advantage in population with China`s population estimated at 1.34 billion and China holds as the second largest economy in the world after United States of America. While on the other hand, Nigeria is the largest market in Africa. It has a population put over 158.3 million people in 2010 and the largest in Africa.
The recent boost in Nigeria-China economic relations is as a result of a number of factors among the most important factors is the recent phenomenon of increased income for both China (More sustained) and Nigeria[3]. Also, there are economic complementarities between the two countries. A dimension of this is the market opportunities which drive the relationship. Thus, while Nigerians (Consumers) are looking for cheap products from China, Chinese growing manufacturing firms are seeking market opportunities for their intermediate and final manufactured products from Nigeria. Also, the input sourcing and export promotion drive of the two nations is another dimension of the economic complementarities. As the growing Chinese firms are seeking raw materials (oil and other minerals, agricultural products, etc for inputs and generation of energy), Nigerian exporters are seeking market opportunities for their primary products. China’s ability to provide the financial and technical assistance (at concessionary interest rate or /and with aid) to Nigeria which is in need of such is another critical factor. The recent repeated political visits by Nigerian government and the reciprocal visits by the Chinese Government which led to the signing of bilateral Trade Treaties and Memorandum of Understandings between the two nations have also strengthened the relationship.
Although before now, Nigeria has established bilateral trade relationship with China, but the magnitude of the trade was not as it is now. Available data from the World Bank (2007) show that in 2000, four broad commodities were exported totaling US$307.3 million, with the main export commodity being mineral fuel and lubricants which represented US$273.7 million (90% of total exports) and next important export in 2000 was crude materials excluding food and fuel which totaled US$33.3 million. The remaining two broad commodities exported to China were quite insignificant with values between US$0.1 million and US$0.2 million. Nigeria’s exports to China increased to US$526.9 million in 2005; the increase was more than 50%. The China’s share of Nigeria’s total exports fell from only 1.5% in 2000 to 0.79 in 2007. In terms of imports, Nigeria’s total imports increased from US$5.3 billion in 1996 through US$5.8billion in 2000 to US$17.7billion in 2005. The dramatic increase of Nigeria’s total imports between 2000 and 2005 was also reflected in the country’s imports from China which rose phenomenally from as little as US$252million in 2000 to US$2.3billion in 2005. Nigeria imports almost all of the broad categories of products from China. In 2005, imports of machinery and transport equipment ranked first followed by manufactured goods, miscellaneous manufactures, chemicals and food and live animals. China’s share of Nigeria’s imports rose from 3.5% in 1996 to 13.44% in 2007. Nigeria’s import from China is more diversified than its exports and Nigeria is a small player compared to other countries exporting to China.
Given the trade pattern, China had a trade surplus with Nigeria during the period 2003-07. The trade surplus rose by almost 91% in 2005 and 24% in 2007 for agricultural, while it rose by about 41, 45 and 27% in 2005, 2006 and 2007, respectively for non-agricultural. The total trade surplus of China against Nigeria was about $3.3 billion in 2007. On product basis, China recorded trade deficits in a few products. Among the economic consequences of the recent growing trade relations between the two countries are the fact that there is a rise in the price or terms of trade (TOT) of primary products of interest to Nigeria and a decline in the price or TOT of manufacturing products produced by China, which resulted into intense competition in the World market. The consequence of all these are the issues of gains/losses and gainers/losers.[4]
Hitherto, traditional development partners mainly from Europe and the Americas (U.S. A and Canada) have dominated trade, investment (in terms of foreign direct investment FDI) and grants and financial as well as technical aid to the country. These are governed by various bilateral and regional agreements that exist between these countries and Nigeria. Although Nigeria and these countries have come a long way in their relationship, it is debatable if such has in any significant way assist the country in its quest for development. The relationship appears to be exploitative at least from the trend in the structure and pattern of trade and FDI inflow to the country. This is based on the fact that oil and gas sector dominates the country’s exports to the tune of about 98% and FDI inflows to the oil and gas sector accounted for about 40%.[5] However, the research seeks to know how is China different from other trading powers? What lessons can we learn from the past in order to make the blossoming relationship produce a win-win outcome?
1.1 Objective of the study
The main objective of this study is to analyze the impact of China-Nigeria economic relations as Nigeria has become an important source of oil and petroleum for China’s rapidly-growing economy and Nigeria is looking to China for help in achieving high economic growth. Above all, the researcher seek to examine China`s economic and political impacts on Nigeria economy owing to China’s contemporary role on the international scene. To identify and analyze the opportunities which can be derive by the country from its trading relations with China. To also look at the evolution of the country’s trade regime and trade policy focusing on the key sectors of its imports from and exports to China, and with particular reference to the market access conditions of imports into the country.
1.2 Research Methodology
The researcher opted to integrate the qualitative approach in this study due to its significant advantages. The use of qualitative data gathering method is advantageous as they are more open to changes and refinement of research ideas as the study progresses; this implies that qualitative data gathering tools are highly flexible. Qualitative is analytical so using primary and secondary sources. Under primary source, I shall conduct various interviews across Nigeria and government officials concerning their perception about China-Nigeria economic relations if need be. While the secondary source shall come from archival materials, published books or scholarly works, internet, international organization official documents, journals, press release, news papers etc. Finally, I shall employ quantitative approach if need be but the research is purely an international relations perspective.
1.3 Literature Review
There are abundance studies on China-Nigeria economic relations with divergent opinions. However, Ogunkola et al. (2008) in their book “Nigeria-China Trade and Economic Relations” pointed out the recent developments in China-Nigeria relation present Nigeria with both opportunities and challenges. Opportunities to learn from China’s growth, development and poverty-reduction strategy and maximizing the spill-over from China’s growth in terms of supply of required inputs and services are important for Nigeria’s development strategy. This is important for Nigeria given the size of Chinese market and its growth trajectory in recent time. The relation with China also provides the country with alternative markets for sourcing inputs for the industrial sector and finished products for consumption purposes. Hence, it has potential of meeting Nigeria’s quest for the much needed diversification of markets for Nigeria’s merchandise. The authors noted that Nigeria’s exports to China spread over many and varied products and increase from $20.3 billion in 2000 to $44.4 billion in 2005. They identify the top 10 exports to China to include: pulp of wood/of other fibrous cellulosic matt; tanning/dyeing extract, tannins and derives; preparation feathers & down, artificial flower; lac, gums, resins & other vegetables saps &extract; oil seed, oleagi fruits miscall grain, seed, fru; cotton and cocoa preparations; copper and articles thereof; ores, slag and ash; and mineral fuels, oils and product of their distillation. Following the dramatic increase of Nigeria’s total imports between 2000 -2005, the country’s imports from China rose phenomenally from as little as $252 million in 2000 to $2.3 billion in 2005 (Ogunkola et al, 2008)
In another vein, Pat Utomi, (2009) “China and Nigeria”, he argued that local businessmen commented that they greatly benefitted from the willingness of many Chinese partners to arrange financing for their projects. This was seen as an opportunity to engage in joint ventures while also learning from Chinese business practices. Another incentive for doing business with the Chinese is the willingness of Chinese expatriates to accept the same living conditions offered to local workers. The author opined that though contrary to the previous experienced, Nigerians commented that this was often an impediment when dealing with expatriates from other countries. He argued that the reduced costs of hiring Chinese expatriates made Nigerians more competitive with large Western multinational corporations. Furthermore, for many years, China’s economic engagement with Nigeria was limited. Relations stayed at the government-to-government level consisting of aid agreements and development projects. However, relations have since greatly expanded into the private sector, with investment often directly encouraged by both the Nigerian and Chinese governments. The Chinese business presence, previously limited to the venturing of Hong Kong textile producers and steel processors, is increasingly being replaced by big commitments from Chinese financial institutions.
Another comparative study was conducted by Adeolu O, et al, (2010) that looked at the effects of global financial meltdown as it affects China-Nigeria cooperation. The author opined that the global financial crisis was triggered by the sub-prime mortgage lending crisis in 2007 in the United State of America (USA). The global financial crisis is characterized by credit squeeze and this has affected the world economy in no small measure since it became a full-blown crisis towards the end of 2007. The crisis got to a peak in September 2008 when several major financial institutions in the USA collapsed. With respect to Nigeria and China- the case of exports, Nigeria export of oil to Asia rose from $8,995.77 million in 2006 to $10,487.47 million and $13,973.39 million in 2007 and 2008 respectively. Similarly, Nigeria Export of oil to China increased from $914.82 million in 2006 to $4,055.92 and $4,412.65 Million in 2007 and 2008. Therefore, it can be seen that the global economic crisis has not hindered bilateral trade flows (import and export flows) between Nigeria and China.
What makes this book outstanding is the provision of full data and analysis into the world financial crises which witnessed economic growth between China-Nigeria despite global crises around the world.
Gregory (2009) believes that Chinese telecommunications companies have moved determinedly into the Nigerian market, as they have elsewhere in Africa, though have not attempted to run their own networks. The Zhong Xing Telecommunication Equipment Company (ZTE) has been in the country since 2001, and claimed that its core businesses in Nigeria are manufacturing handsets and supplying system equipment. The company estimated that it has sold 40 million handsets in Nigeria, ZTE also supplies system equipment to two local network providers, Starcom and Multilink’s. Huawei is another Chinese telecommunications company, which is also active in Nigeria and has expanded its presence there far more aggressively than ZTE. It has six offices in the country compared to ZTE’s two, and supplies system equipment to all its network service providers, including market leader MTN, and Zain, Glo, Visafone and Zoom Gregory (2009).
Lawal (2009) as part of China’s strategy in Africa, the scholar asserted that China created the Forum on China-Africa Cooperation (FOCAC) in 2000. The first ministerial conference under the aegis of FOCAC was held in Beijing in October 2000. At this meeting, more than 80 ministers from China and 44 African countries came together. And at this time, the Beijing Declaration of the Forum on China-Africa Cooperation and Program for China-Africa Cooperation in Economic and Social Development were promulgated and adopted as the basis for future cooperation. Under this new dispensation, China becomes a major player in the global economy. The author noted that China can be a role model for African communities seeking to establish development frameworks for economic prosperity, growth and overall development. Such cooperation, in addition to opening up markets, can be mutually beneficial Lawal (2009).
“With rich resources, huge market potential, technological know-how and accessible capital, Africa and China can achieve a win-win cooperation; thus giving impetus to the drive towards a sustainable development of the global economy”. (President Kufuor of Ghana 2000)[6]
In the case of Africa, according to Corkin (2008), Angola is currently China’s largest trading partner in Africa, accounting for roughly one fifth of the African continent. Angola export to China rose from $ 243 million in 1996 to $ 10.9 billion in 2006 while China’s exports to Angola rose from $ 28.5 million in 1996 to $894 million in 2006, he opined that China runs a considerable trade deficit with Angola (as one of the China’s main oil producer) while Angola enjoys trade surplus with China.
South Africa in the picture, Burke et al, (2008) indicates that South Africa is China’s second largest trading partner in Africa, after Angola. The trade volume between South Africa and China accounted for 20% of the total trade volume between China and Africa as a whole. The direct bilateral trade between both countries started in the 1990s and in 2004, South Africa granted China market economy status. However, to correct this lingering situation, South Africa and China have committed to work together to create favorable conditions for growth in relations between both countries and balance of trade (Burke et al 2008).
Having examined different sources from the literature review, there were quite a number of contradictions and divergent opinions among the authors who have studied on China-Nigeria’s relations. According to Adeolu, et al. (2010), posited that Nigeria’s exports to China increased to $ 526.9 million in 2005. However, the increase was more than 50% of which China’s share of Nigeria’s total exports fell from 1.5% in 2000 to 0.79 in 2007. In addition, Gregory (2009) in his book “Elephant, ants and Superpowers: Nigeria’s Relations with China” shared similarity with Adeolu that Nigeria’s exports to China as at 2005 recorded $ 527.1 million while China’s import to Nigeria the same year rose to 2305.3. More so, Ogunkola et al. (2008) contributed differently that Nigeria’s exports to China though spread over many products and increase from $ 20.3 billion in 2000 to $ 44.4 billion in 2005. Holistically, this is one of the areas the researcher intends to contribute to the existing literatures and to also unveil or expose some erroneous notion about China-Nigeria economic relations.
