China in Nigeria China sent its first trade delegation to Nigeria in 1961, and relations between the two

have strengthened as Chinas investment in Nigeria reached six billion dollars in 20101. Nigeria remains Chinas second largest African trading partner as trade between the two increased by 41.8 percent in the first half of 20102. Aside from trade relations, China and Nigeria have developed political, military, and cultural ties. Chinas main interests in the Sino-Nigerian relationship are increasing Chinese access to oil, exporting Chinese goods into the Nigerian market and developing an interdependent relationship. With help from its relationship with China, Nigeria has experienced a large increase in its gross domestic product. Concurrently, many of its interactions with China have been detrimental to Nigerian manufacturers and generated less incentive for Nigeria to combat its institutional problems. With the expansion of Sino-Nigerian relations, the United States may lose an important economic partner as well as some of its influence in the African region. China is under pressure to increase its access to oil as its domestic demand for energy grows. The Sino-Nigerian bilateral relationship emerges from Chinas desire to gain oil and Nigerias wish to sell it. Nigeria has large reserves of light crude oil that are expected to double in production by 2025 3. There is also high probability of new oil and gas discoveries in Nigeria. To gain access to oil resources, China focuses on strengthening its relationship with Nigerian government officials and elites by investing in oil while granting development aid. During President Obasanjos term, Chinese companies gained access to large amounts of oil in exchange for infrastructure aid. However, many of these deals were suspended or cancelled by Obasanjos predecessor YarAdua as he called for an investigation over the oil for infrastructure policy and expressed his preference for an oil for cash approach4. Even still, the Chinese stake in Nigerian oil increased with the Chinese company Sinopecs 2009 purchase of the Canadian Addax Petroleums onshore and offshore oil operations.5 In 2010 acting

China-Nigeria trade ties continue to strengthen. China Daily. March 23 2010. Accessed March 25 2011. http:// english.peopledaily.com.cn/90001/90778/90861/6927630.html
2

Ibiwoye, Dotun. Nigeria China trade hits N540bn in second quarter 2010 Vanguard Online Edition. November 30, 2010. Accessed March 25 2011 http://www.vanguardngr.com/2010/11/nigeria-china-trade-hits-n540bn-in-second-quarter-2010/
3 4

Rotberg, 2008

Mthembu-Salter, Gregory. Elephants, Ants and Superpowers: Nigerias Relations with China. China in Africa Project: Occasional Paper No 42. South African Institute of International Affairs. September 2009.
5

Ibid.

president Goodluck Jonathan accepted the Chinese proposal to spend 23 billion dollars improving the infrastructure of Nigerian refineries.6 Currently, Nigeria is Africas second largest producer of Chinas crude oil imports and provides four percent of African oil exports to China. China not only wants access to Nigerian oil but also wants to protect its access. This creates an incentive to increase interdependence through trade, military cooperation, and cultural and political ties forging a relationship more likely to allow the Chinese continued access to Nigerian resources. While Nigeria's oil industry is the main recipient of investment, Chinese firms also have economic ties to Nigeria in the construction, textile, pharmaceutical, and telecommunications sectors 7. Multiple trade agreements and memorandums of understanding have been signed extending beyond the oil industry8. A trade deficit between China and Nigeria exists because China floods its manufactured commodities into Nigerian markets9. Nevertheless, Chinese investments within Nigeria have helped increase Nigerian gross domestic product and create a demand for Nigerian oil allowing an influx of money into the country. China and Nigeria reached multiple deals that would have helped improve Nigerian infrastructure during Obasanjos term, but political changes with YarAduas presidency brought those to a halt. With Jonathan now serving as acting president, it is possible that new deals may replace these. Since 2006 China and Nigeria have been developing the Lekki Free Trade Zone, which will be one of the largest in Africa. This zone will enable Chinese companies to manufacture and export goods throughout the continent10. The Lekki Free Trade Zone will create domestic jobs and allow Nigerians to buy products normally imported from China domestically.11 As the global financial crisis reduced demand from the United States for Chinas goods, developing stronger economic ties and free trade zones in Nigeria presents an opportunity for China to maintain a positive trade balance. Free trade zones allow Chinese companies to generate a profit and reach more consumers. Chinese companies that
6

Hall, Simon and Spencer Swartz. Nigeria, China Sign Major Oil Deal. The Wall Street Journal. May 15 2010. Accessed May 25 2011. http://online.wsj.com/article/SB10001424052748703460404575243892823004542.html
7 8 9

Mthembu-Salter, September 2009 Rotberg, Robert. China into Africa: Trade, Aid, and Influence. Washington, D.C.: Brookings Institution, 2008

Uzor, Naomi. Nigeria: Bilateral Trade with China, Increased by 76.3 percent. Vanguard. June 23 2010. Accessed March 25 2011. http://allafrica.com/stories/201006231056.html
10

Beegeagle's Blog. China, Nigeria building huge free trade zone in Lagos. September 5 2010. Web. 25 Mar. 2011. http://beegeagle.wordpress.com/2010/09/05/china-nigeria-building-huge-free-trade-zone-in-lagos/
11

Ibid.

are failing domestically are encouraged to move offshore to these free trade zones relieving economic pressures companies face in China.12 Nigeria is also viewed as the gateway to West Africa, and Chinas relationship with Nigeria can help transform the Sino relationship with the rest of the continent. 13 Outside of economic interactions, China and Nigeria have developed political, military, and cultural ties. Presidents of both countries have exchanged visits and continue to express their desire to forge stronger ties. Nigeria has embraced the One-China policy and supports the Chinese governments human rights policy. In 2009, China and Nigeria pledged to forge greater military cooperation as China expressed its desire to help Nigeria maintain control over its natural resources. Cultural and educational exchanges between China and Nigeria are also increasing. China established Confucius Institutes and created links through educational institutions to teach Nigerians about Chinese culture and language. While Chinas actions in Nigeria have boosted its economy, Chinese competitors have wedged many Nigerian domestic manufacturers out of the market. There is an unregulated overflow of Chinese goods entering Nigerian markets driving out small Nigerian manufacturers. Further, Nigerian manufacturers comparative advantage in textiles has disappeared due to Chinese competition, to be replaced by tanneries.14 Unemployment and poverty remain high in Nigeria as poverty rates were over 50 percent in 201015. With an increase in Chinese investment also comes the immigration of Chinese citizens, making it more difficult for Nigerians to find jobs or forces them to settle for lower positions and wages16. The overall public has not demonstrated large backlash to Chinese investment. Most Nigerian trade unions, specifically the Manufacturers Association of Nigeria, have blamed Chinese imports for the loss of manufacturing jobs17. Some unions like the Small Scale Industrialists, on the other hand, argue Nigerians should rise to the competition challenge Chinese commodities impose by improving the quality
12

China-Nigeria trade ties continue to strengthen. China Daily. March 23 2010. Accessed March 25 2011. http:// english.peopledaily.com.cn/90001/90778/90861/6927630.html
13

Rotberg, 2008. Quote from Martyn J. Davies Special Economic Zones: Chinas Developmental Model Comes to Africa.
14 15

Mthembu-Salter; Elephants, Ants and Superpowers: Nigerias Relations with China

Nigeria Growth Rate. Trading Economics. Accessed March 25 2011. http://www.tradingeconomics.com/ Economics/GDP-Growth.aspx?Symbol=NGN
16

Campbell, Jon. Opinion: Whos in charge, China or Nigeria? Globalpost.com. June 7 2010. Accessed March 25 2011. http://www.globalpost.com/dispatch/worldview/100604/nigeria-oil-china?page=0,1
17

Ori, Kony Obaji. Nigeria: Manufacturers frown at Chinas dumping of cheap products. Afrik-News. March 12 2010. Accessed March 25 2010. http://www.afrik-news.com/article17137.html

of their products. The most radical response has been from Niger Delta militant groups who express their disdain for Sino-Nigerian interactions through the kidnappings of Chinese workers from companies working in the Niger Delta oil field18. As the flow of money into the country has increases without conditionality attached, Nigeria has less incentive to combat its corruption, lack of transparency, and weak regulatory problems. If the acting Nigerian president decides to pursue an oil for cash over an oil for infrastructure policy, these institutional changes will be less likely, and rent-seeking behavior more likely, to occur. Corruption is especially widespread in Nigerias oil industry apparent in 2009 estimations that roughly 100,000 barrels of oil were either stolen or smuggled daily from Nigeria, resulting in a revenue loss around $1.6 billion a year19. There is also a large amount of unrecorded trade between China and Nigeria, especially related to Chinese imports. In the face of Nigerian complaints about counterfeiting and smuggling, the Chinese reply is that Nigerian demand for low priced goods and its weak regulatory regime are at fault 20. The growing relationship between Nigeria and China represents what some may view as a successful alternative to the Western, United States driven development model, which centers on granting aid and investment with conditionality intended to develop institutions and good governance. If Nigerian growth continues to rise and others view this relationship as mutually beneficial, more states, especially African, will turn to China over the United States as a trading partner. However, if this relationship appears to be one of Chinese exploitation or negatively affecting Nigeria, states may decide that the Western development model is better. The United States remains one of Nigerias top trading partners, especially in the oil sector21. Rising oil production by China in Nigeria will help the United States because increasing the production of oil will drive down its overall price on the market. Nevertheless, the United States will be hurt if Chinese companies are able to outbid American companies for oil deals or granted them on the basis of its ties with Nigeria. As interactions between China and Nigeria have expanded, cooperation has moved beyond the oil industry through trade, political, military, and cultural exchanges. Chinese trade does hurt sectors of the Nigerian economy, but Nigerias own policies are the main impediments to its development. The current Sino-Nigerian relationship could threaten United States interests in the region if China builds a successful relationship with Nigeria allowing it to spread its influence. If the Nigerian government does
18 19 20 21

Rotberg, 2008 Mthembu-Salter; Elephants, Ants and Superpowers: Nigerias Relations with China Ibid.

Background Note: Nigeria. Bureau of African Affairs. State Department. February 3 2011. Accessed March 28 2011. http://www.state.gov/r/pa/ei/bgn/2836.htm

not utilize Chinese investment wisely, it is unlikely that the institutional, unemployment, and poverty problems facing Nigeria will be resolved.

Works Cited