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Nigeria - China Relations

There are growing influence of China and other emerging powers in the continent of Africa. Some of the factors that have contributed to this is the increasing investment in infrastructure and development as well as the low cost of products being dumped in the African markets.

China suspended its cooperation with DICON (Defense Industries Corporation of Nigeria) in 2004 after the GON failed to provide agreed upon funding. Reports emerged about Chinese plans to sell F-7 or F-8 fighters to Nigeria to replace Nigeria's aging and non-operational fleet of MiG-21s. Outside observers believed that Nigeria had chosen to buy new aircraft from China instead of rehabilitating the old aircraft because the opportunities for graft are far greater in buying new, especially from China.

There are glaring similarities between the two countries: as the Peoples Republic of China is the most populous country in Asia, nay the world, so is Nigeria in Africa. Both countries share 1st October as their National Day October 1, 1949 for China and 1960 for Nigeria.

Since February 1971 when China and Nigeria established diplomatic relations, bilateral business ties have experienced continuous growth. Especially since the beginning of the new century, the two countries have increased high-level political exchanges and moved fast in economic cooperation. A range of bilateral agreements including the Agreement on economic and Technical Cooperation,Trade Agreement,Agreement on Mutual Investment Promotion and Protection and Double Taxation Agrement have been signed between the Chinese and Nigerian governments.

China and Nigeria signed the first economic and technical agreement in 1972. Since then the two sides have been engaged in aid and technical cooperation projects including well digging and water supply, comprehensive hospital and rural primary schools. China donated four rural primary schools in Abuja, Kaduna, Katsina and Ogun, which can accommodate l,200 students. The China-assisted comprehensive hospital, completed in 2012, covers a floor area of 7,961 m2 and has 150 beds. It will play an important role to enhance local medical conditions and medical care.

By 2010 China's presence in Nigeria was growing. There were 200 to 300 Chinese businesses in the country while the bilateral trade between the two countries is estimated at $7 billion for 2009. China's dependence on oil is encouraging its oil companies, such as CNOOC and Sinopec, to take an interest in Nigeria's oil fields. Chinese companies are investing in the non-oil sector but the investments are minimal when compared to the oil sector investments. Nigerians are interested in Chinese investments but not in the Chinese labor that most Chinese companies bring with them. The Chinese population in Nigeria is estimated at 20,000-50,000. Commercial relation with Guangdong Province, which alone accounts for over 60% of all the trading and investments flow between Nigeria and China,

While the investment of China is welcomed in the area of infrastructure development and military cooperation, encouraging China to invest in manufacturing industries in Nigeria rather than exporting their products would help in improving the unemployment climate. This is more so that the Chinese take advantage of their low cost of production which in turn enables them to export cheaper goods thus dominating the market in developing countries like Nigeria. The effect of this is closure of production lines in such countries. The resulting unemployment has implications for national security.

The search for raw materials and oil for her industries as well as markets for her goods has informed a shift in focus of Chinas relationship with African countries from ideological considerations to trade centred engagements. The Peoples Republic of China is the worlds second largest consumer of oil after the USA and its consumption was expected to double by 2025. Apart from various bilateral economic relationships with Nigeria, especially in the construction and technological spheres, her oil imports makes her a strategic partner to Nigeria.

Chinese goods are entering and dominating some segments of the consumer market. The two countries estimate their bilateral trade at $2 billion, with Nigeria importing $1.42 billion of Chinese goods in 2004, with Nigeria as China's second largest market on the continent. This is reportedly a five-fold increase in the last four years. Though China does little manufacturing in Nigeria, there is anecdotal evidence that Chinese firms are manufacturing pirated music and movie products in Nigeria, using Chinese labor. The U.S. Mission has reported in detail Chinese activity in Nigeria's booming telecommunications sector. China is participating in some joint agricultural projects, though as of 2005 they were mainly small pilot projects.

The energy sector has seen most activity with Chinese firms becoming involved in developing oil blocks, and pledging investment in refining. In July 2005, the Chinese state-owned PetroChina company signed an $800 million agreement with the Nigerian National Petroleum Corp. to import 30,000 barrels of oil per day for five years. Firms have expressed intent to explore opportunities in power generation, coal processing and petrochemicals. China is clearly interested in developing Nigeria as an energy supplier, and to some extent is willing to pay a premium, often in the form of agreeing to make additional investments in less attractive areas. It is not clear whether in the end those investments will actually materialize.

There may be a limit to that premium. Chinese firms did not place any winning bids in the 2005 oil block bid round, possibly, like Western oil majors, determining that the prices were too high for the presumed return. There is little reason for China to pay a premium for general oil supplies. Oil is a commodity that in most circumstances can be acquired on the market at the prevailing price. With its extreme dependence on imports, however, China probably would be willing to pay a significant premium to secure supplies that would reliably be available in case the oil markets ceased to function normally. For now, Nigerian sources would seem to be of questionable deliverability in case of a global supply interruption.

In pursuing its economic interest here, China is free to ignore human rights, democracy, and other issues which complicate the U.S. relationship. Still, while Chinese firms might have some advantages over western firms in terms of business practices, safety standards, and responsibility to shareholders, nonetheless they will be active here only to extent that there is an advantage. In fact, Chinese firms face most of the same problems as others in doing business in Nigeria. The Standards Office of Nigeria said 90% of Chinese electrical goods failed to meet standards, and starting in October 2005 would be impounded upon import. Kaduna refinery workers this in October 2005 denied access to representatives of the company's new management, the China National Petroleum Company, citing labor issues. A Chinese company that won a contract to rehabilitate the Nigerian railway system stopped work for some time, because it failed to receive a $20 million payment.

Nigerian President Olusegun Obesanjo (1999-2007) encouraged Chinese state companies to acquire oil blocks in Nigeria in return for Chinese commitments to invest in infrastructure projects, but the scheme eventually failed because of no viable mechanism to implement and enforce deals. No Chinese-led infrastructure project was actually executed, including the widely-discussed proposed building of a Lagos-Kano railway.

Huawei, China's largest telecoms-equipment company, signed an agreement with the Ministry of Communications for the introduction of new information and communications technology (ICT) in Nigeria. Huawei also supplies fiber optic cables and modems for Internet service. HIS Nigeria Plc, a leading telecom infrastructure provider in Nigeria, uses Chinese companies for its supply of towers, batteries, gensets and fences. ICT has great potential in Nigeria, and China supplies a good portion of the equipment needed to make ICT operations run.

Nigerians appear to be interested in Chinese investment but are wary of it at the same time. International press reports claim that some Nigerian officials are concerned about the Chinese practice of importing Chinese workers who could exacerbate local resentment, particularly in the Niger Delta where there are major grievances over the lack of employment opportunities. Nigerians are adamant about using local labor and not bringing large numbers of Chinese laborers into the country. Lack of electircity and cheap Chinese textile imports have devastated the local textile industry. According to the local press, more than 65 textile mills had closed in Nigeria and more than 150,000 Nigerian textile workers had lost their jobs over the ten years 2000-2010. More than one million other Nigerians, such as traders and cotton farmers, have also suffered from the down-sizing of the textile industry. The Chinese are adept at making counterfeit "Nigerian" fabric. Virtually all of the 10,000 vendors at the major market in Onitsha source their goods from China. Cheap Chinese products and lack of local transportation and power infrastructure make it cheaper to be a trader than a manufacturer in Nigeria.

There are an estimated 20,000-50,000 Chinese living in Nigeria, including 20,000 at "Chinatown" in mainland Lagos. Most Chinese are located in the larger cities, such as Lagos, Abuja and Kano. The number of cultural and tourist exchanges, such as the visiting Chinese dance troupe which performed in Abuja for PRC National Day on September 30, may continue to increase with the growth of Chinese business interests in Nigeria. China's Southern Airlines flies directly to Lagos three times a week, with a fueling stop in Dubai, and the airline would reportedly like to increase the frequency of these flights.

Nigerians now constitute the largest migrant population from Africa living in China and Chinese now favorably compared to India as Asian migrant population in Nigeria.




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