In the past decade, trade took off between Nigeria and China. In the coming decade, bilateral economic relations could soar. With right policies, stars are aligned for a ‘win-win’.
Last year, Nigeria’s trade accounted for about 23 percent of its GDP. That’s still 36 percent less than the comparable figure in South Africa. Moreover, petroleum exports continue to account for almost 90 percent of Nigeria’s export revenues.
Nigeria could intensify its trading by a magnitude, especially when oil prices will stabilize. But the country could also promote increasingly its non-oil exports, by accelerating the potential of its vibrant small-and-medium-size enterprises (SMEs). The interplay of the two – intensified trading and SMEs’ non-oil exports – could boost Nigerian competitiveness as well.
Many of these objectives could be realized through broader and deeper economic relations with China.
Bilateral trade to soar
As the Canton (Guangzhou) Fair, China’s largest trade fair, has peaked, the megacity of 10 million people has hosted more than 150,000 overseas buyers. That’s a perfect time to visit Guangzhou’s Fair, which also serves as a barometer for exports.
Ahead of this year’s fair, the Chinese government tried to simplify visa application processes for Nigerian businesses to support bilateral trade. In turn, Liu Kan, China’s Consul-General in Lagos, appealed to Nigeria’s federal government to create the right environment for more companies to come and invest in Africa’s largest economy.
In the past few years, Nigeria has become China’s third-largest export destination in Africa after South Africa and Angola, while China is Nigeria’s largest source of imports and third major trade partner. Meanwhile, thousands of Nigerians have made China – in particular Guangzhou – their second home.
Recently, Nigeria’s Ambassador to China, Olushola Patrick Onadipe, noted that the trade volume between Nigeria and China has risen to $16 billion.
Last year, Chinese companies invested in Nigeria’s construction, manufacture, oil and gas, telecommunications, agriculture, real estate sectors and free trade zones. In turn, Consul-General Liu disclosed plans by more Chinese companies to establish operations and do business in Nigeria. One example could involve Nigeria’s old railway network, which is still running on the narrow device tracks laid down by the British colonial government when they started the service in 1912.
Last year, President Goodluck Jonathan’s administration got Nigeria’s exhausted railway network on its feet with a $152 million investment program. Recently, President-elect Muhammadu Buhari inspected the prototype of a high-speed rail project by the China Civil Engineering Construction Corporation (CCECC). The meeting was seen as a sign that Buhari’s government may be looking to develop a high-speed rail system across Nigeria.
Anti-corruption struggle as a common denominator
After General Buhari’s election victory, China’s President Xi Jinping expressed his confidence that Nigeria will attain greater achievements in national construction under Buhari’s leadership.
Indeed, the ongoing year marks the 10th anniversary of the establishment of strategic partnership between Nigeria and China, which established diplomatic relations already in February 1971.
Interestingly, last year a BBC poll reported that 85 percent of Nigerians view China’s influence positively, with only 10 percent expressing a negative view. In turn, China has provided increasing and extensive economic, military and political support for Nigeria and its bid for a seat in the U.N. Security Council.
What Beijing’s political leaders and Chinese investors overall find particularly intriguing in the incoming Buhari administration is its stated objective to launch an intensive struggle against corruption. That goal is shared by the incumbent Chinese leadership.
Amid the Chinese leadership transition, I spent countless hours in interviews that focused on the agenda priorities of the new administration. While international media was often skeptical about China’s anti-corruption intentions, I argued that “this time was different.”
Indeed, when President Xi Jinping and Premier Li Keqiang arrived in the office, the two soon initiated broad and deep anti-craft efforts. As Wang Qishan, a tough and highly-regarded Chinese politician, became Beijing’s anti-corruption tsar, it was clear that anti-craft efforts had come to stay in China.
A tough Buhari anti-corruption drive could boost Chinese investor interest in Nigeria as well.
The lessons of Lula’s Brazil
In the past months, the plunge of oil prices has hit the Nigerian economy hard. Over time, those prices are likely to climb again. Nevertheless, Abuja has not fared well in the cheap oil landscape.
Nigeria lacks adequate fiscal space, a diversified industrial structure and non-oil sources of comparative advantage to overcome its challenges.
In the past decade or two, President Lula’s Brazil offers an example of the use of trade to surpass economic challenges. When he took over, Latin America’s greatest economy was facing serious crises, like Nigeria today.
Domestically, Lula surprised many by stressing a conservative fiscal policy. However, the result was macroeconomic stability, which brought back domestic and foreign investors.
In foreign economic relations, President Lula took advantage of soaring commodity trade with China. However, he also sought to ensure that these trade benefits would boost competitiveness in the private sector, while lifting millions of Brazilians from abject poverty and into lower middle class.
Timing favored President Lula’s plans. At the time, China was amid its most energy-intensive phase of industrialization and urbanization, which translated to huge need for Brazilian commodities.
On the other hand, President-elect Buhari can benefit from an advantage that President Lula did not have. A decade ago, Chinese multinational companies could not yet engage in capital exports. However, today they are seeking favorable investment environments and boosting soaring foreign direct investment.
Stars are well aligned
Only a few years ago, the United States was Nigeria’s primary buyer of petroleum products. After the shale gas revolution, the US is becoming Nigeria’s competitor in energy exports. In contrast, China’s need for energy will remain substantial, particularly in the third- and fourth-tier cities, which are now growing relatively faster than the more prosperous first-tier cities in China’s coastal regions.
Furthermore, as Nigeria will gradually steer away from hydrocarbons to diversify its industrial structure, it needs to attract more inward foreign investment into sectors other than oil and gas. What Nigeria needs the most is infrastructure investment.
Recently, Abubakar Bulaiman, Nigeria’s minister and deputy chairman of the National Planning Commission, noted in Beijing that Nigeria has a lot to learn from China’s rich infrastructural development. In the process, he also promoted Nigeria’s own 30-year developmental plan and called Chinese investors to come and participate in Nigeria’s modernization. “Our country’s natural resources can only be effectively harnessed when and if the right infrastructure is in place.”
Today, stars are well-aligned for intensified cooperation between Abuja and Beijing – as long as cooperation is based on a long-term perspective and will support Nigerian competitiveness and Chinese investors.
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
