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NIGERIA AND CHINA-POLITICAL, ECONOMIC AND CULTURAL RELATIONS (1999-2007)
ABSTRACT
China is essentially a state par excellence, a strong state like the United States with expansionist behaviour and attitudes. Demographically, China has the largest population in the world, 1.3 billion inhabitants that is more than the entire African continent. It has the third largest stock of foreign direct investment after the United States and United Kingdom. Its ideology has been the socialist market economy which embodied elements of pragmatism, free market and state dirigisme. In the past few years, especially since the declaration of the Beijing Consensus, intellectuals, Western media, human rights organization and the International Monetary Fund have intensified their criticisms regarding Chinese policy towards Africa, especially its loan and foreign investment practices and its behaviour and attitudes towards oil producing states. Regrettably, China’s increasing engagement with Africa has largely gone unnoticed in African studies. To worsen the situation, very few African scholars have devoted quality time to critically anlayse Nigeria-China relations since the end of the Cold War. This study has been designed to bridge this gap in the literature. The central questions that formed the foundation of the inquiry are; what were the determinants of Nigeria – China relations between 1999 to 2007? To what extent has economic diplomacy impacted on the trade relations and inflow of foreign direct investment from China to Nigeria within the period under review? Theoretically, we anchored our analysis within the liberal theory of economic development and underdevelopment. Our choice of this theory is based on the fact that Nigeria – China relations is based on partnership, mutuality, reciprocity, and common prosperity, and not on any form of European or American neocolonialism and imperialism. The liberal theorists believe that interdependence between the developed and developing countries are beneficial to both. This theory is related to the win-win theory of international relations. The win-win theory implied that liberal economic cooperation through trade flows, foreign-domestic flows, technology transfer and integration in the global value chains and aid flows, should bring proportional benefits, which otherwise the partners would not have access to before entering into these relations. We adopted qualitative research design and relied mainly on documentary sources of data collection and
content analysis of primary and secondary sources of data. We collected data from Chinese Embassy, Nigeria’s Foreign Affairs Ministry, Nigeria Investment Promotion Commission, Central Bank of Nigeria and Nigeria Immigration Service among others. More importantly, we relied on current journals, textbooks, magazines, conference papers and other secondary sources of data. To ensure the validity and reliability of our methods, we relied on content of analysis of available information. After critical analysis of available data, the study reveals that China’s dynamic economic growth is fueling an ever increasing demand for Nigeria’s oil. In fact, guaranteed long term access to Nigeria’s relatively underexploited natural resources clearly tops China’s agenda. In 2005, China through her corporation, Petro-China singed an $80 million contract with Nigerian Government to locate upstream oil and gas that will guarantee 30,000 barrels per day to China over a period of five years. China has invested over $4 billion worth of investment in exchange for oil in Nigeria. At present, just over 30 percent of China’s oil requirements come from Africa, mostly from Sudan, Nigeria and increasingly the Gulf of Guinea. Beijing has singed more than 40 oil agreement with different African countries including Nigeria. The study also shows that while china’s principal interest in Nigeria is access to natural resources, the country also provides new markets and investment opportunities for China’s growing economy. Currently, about 750 Chinese enterprises are active in Africa with total investment of over $1 billion and many of them are doing business in Nigeria. In conclusion, china is both a tantalizing opportunity and a terrifying threat to Nigeria. On the one hand, China is just the tonic that mineral rich, but economically ailing Nigeria needs. On the other hand, China’s effort to flood the Nigerian market with cheap products is a great threat to the Nigerian economy.
TABLE OF CONTENTS Page
Title Page – – – – – – – i
Acronyms – – – – – – – v – vi List of Tables – – – – – – vii-viii Abstract – – – – – – – ix – x
Table of Contents – – – – – xi – xiv
- Statement of the Problem – – – – 4- 8
- Literature Review – – – – – 12
- Economic Diplomacy And – – – 39 -43
- Literature Review – – – – – 12
Nigeria China Relations – – –
- Economic Diplomacy and Inflow of – – 43-62
Foreign Aid and Foreign Direct Investment (FDI)
- Economic Diplomacy and Value – – 63-81
of Trade Between Nigeria and China
- Economic Diplomacy and Obasanjo’s
Anti-corruption Policies in Nigeria – – 81 -87
| 1.5 | Theoretical Framework | – – 87 92 |
| 1.6 | Application of The Theory | – – 92 -93 |
| 1.7 | Hypothesis | – – 93 |
| 1.8 | Method of Data Collection | – – 93 -97 |
| 1.9 | Validity and Reliabity | – – 97 -98 |
| References | – – – – 99 – 104 |
CHAPTER TWO: THE HISTORY AND DETERMINANTS OF NIGERIA-CHINA RELATIONS
- The Era of Internal Ties, 1960-1971 – – – 105 -107
- The Era of Formal Ties 1971-1988 – – – 107-111
- Obasanjo’s Economic Diplomacy & Nigeria China Relations (1999- 2007) – – – – – – – – 111-115
References – – – – – – – 116
CHAPTER THREE: OIL AND NIGERIA CHINA RELATIONS
- Oil in Nigeria: An Introductory Note – – – 117-125
- Oil Politics & China’s Quest for Nigerian Oil – 125-135
- China’s Oil Diplomacy in the New Gulf of Guinea – 136-142
References – – – – 143-145
CHAPTER FOUR: TRENDS AND CHALLENGES OF NIGERIA-CHINA TRADE RELATION 1990-2007
- Nigeria-China Trade Relations: A General Viewpoint 146-153
- The Trend of Nigeria-China Trade Relations, 1999-2007 153-156
- Size Composition and Significance of Nigerian Exports to China 156-159
- Size Composition and Significance of Imports from China 159-161
- Top Ten, Export & Import Commodities – – 161-163
- Bilateral Trade Agreements between Nigeria & China 165
- Bilateral Trade Agreement – – – – 165
- Memorandum of Strategic Partnership- – – 165-172
- The Challenges of Nigeria-China Trade Relations – 172-175
References – – – – 176-178
CHAPTER FIVE: NIGERIA-CHINA RELATIONS AND INFLOW OF FOREIGN AIDS AND FOREIGN DIRECT INVESTMENT
- The Inflow of Chinese Foreign Aid to Nigeria, 1999-2007 179-183
- Chinese Investment Seal with Nigeria – – – 183 -187
- General Trend of Chinese Foreign Direct Investment Inflow in
| Nigeria | 187-188 | |
| 5.3.1 | Trend in Chinese FDI Inflow to Nigeria | – – 188 -189 |
| 5.3.2 | Composition of Chinese FDI in Nigeria | – – 190-196 |
- Chinese Investments in Different Sectors of the Nigerian Economy 196
- Chinese Investment in the Oil Sector/Oil Exploration – 196 -201
- Investment in the Energy Sector – – – 201 -206
- Investment in Satellite Communication Networks – 206 -212
- Investment in the Transport Sector – – – 212 -217
- Investment in Nuclear Technology for Peaceful Purpose 217-218
- Investment in Provision of Water – – – 218-224
- Investment in Housing – – – – – 224-227
- Investment in Health Sector – – – – 228-230
- Chinese Investment & Political Relations with Nigeria 230-233 References – – – – 234-237
CHAPTER SIX: SUMMARY, CONCLUSION & RECOMMENDATION
6.1 Summary & Conclusion – – – – – 238-240
| 6.2 | Recommendation | – – – – – – 240-245 |
| Bibliography | – – – – – – 246-263 | |
| Appendices | – – – – – – 264-299 |
CHAPTER ONE INTRODUCTION
In the emerging world order, a broad transformation of political alignments is underway with economic factors rising to prominence in the calculations of every nation (Agbu, 1994). In fact, the growing integration of the world’s economy driven by the globalization process, and controlled by international capital which is domiciled largely in Western industrialized countries has opened up most countries of the world and promoted greater freedom in trade and capital flow. According to Kwanashie (2007) trade liberalization is the key to logic of the current global strategy for growth
driven by neo-liberal or orthodoxy. This presupposes why the present China- Nigeria relations is fundamental.
Nigeria’s first contact with the Peoples Republic of China (PRC) was in 1960, when she was invited to the country’s independence celebrations. According to Owoeye (1986) this Nigeria’s first contact with China is designated as “the era of informal ties, 1960-1971.” At independence, Nigeria political leadership was not only pro-West but vividly anti- communist. The resultant effect of this peculiar disposition was that Nigeria’s attitude towards communist China followed what had then emerged as a clear pattern of most of her relations with the Socialist States- diplomatic isolation accompanied occasionally by bitter attacks against communist ‘subversive’ ideology at home. As Alaba Ogunsanwo (2007), noted, “at independence, the worldview of Nigeria’s political leadership did not factor close relations with the Peoples Republic of China as one of the elements which the country would need to cultivate.” (Alli, 2007). This was despite the fact that Nigeria was the third largest market in Africa for Chinese goods, with a steady growth in import from China. At the same time, the Chinese did not allow Nigeria’s diplomatic snob and ideological preference for capitation to stand in the way of their obviously very lucrative trade relations with the country (Alli; 2007).
Nigeria which had consistently voiced its willingness to formalize ties with People’s Republic of China did so on 10 February 1971 (Owoeye, 1986). According to Kwanashie (2007) Nigeria established relations with China in February 1971 and has since then maintained good relations with her. Like her relationship with most other countries, Nigeria makes little effort in driving these relationships for her benefits. However, Kwanashie argued that the Sino-Nigeria economic relation if properly managed by Nigeria is capable of enhancing the success of reforms. He maintains that China provides a good source of growth inputs into the Nigerian economy. It is clear that Sino-Nigeria relations are driven by the diplomatic initiative of China. The danger for Nigeria is that China’s interests might over shadow the benefits that could result from these relations (Kwanashie, 2007).
China as economic partner to Nigeria has been very dogged and focused in its relations with Nigeria over the decades. Despite the ups and downs of Nigeria-China relations, the Chinese have continued to ensure that their market shares in Nigeria remain on a steady path of growth. This should suggest that China has a long term plan for its engagement with Africa, and it is important for African states, particularly Nigeria to develop a strategy for managing the relationship (Alli, 2007).
At present, some criticisms have been made against the Chinese. They have been accused of dumping, evasion of customs and of exporting substandard products, particularly pharmaceuticals and other consumer items into the country. Despite all these, Chinese products have continued to enjoy enormous patronage in the country largely because of their cheap prices. Another criticism is that Chinese companies tend to maintain harsh labour conditions for their Nigerian workers, while at the same time giving most of the jobs to Chinese nationals. Yet, amidst all these criticisms, there is a growing continuity in the China-Nigeria bilateral relations.
It is therefore clear that the economic engagement of Nigeria with the Chinese has grown so rapidly that the nation Nigeria has not been able to pause and think out of proper framework for engagement. From a seeming unknown some years ago, China now bestrides the Nigerian economic terrain like a colossus sending shivers down the spine of many other powers that would like to consider Nigeria their sphere of influence. Importantly, this rapid growth in trade relations between the two nation-states has been largely to the advantage of China.
It is important to note that Nigeria and China shared certain things in common. Nigeria and China are demographic giants and their interests in international affairs cannot be ignored. Nigeria is Africa’s most populous
country, while China’s population is second to none in the world. Nigeria, until the recent deapartheidisation in South Africa, has been the leader of Africa, while China has for long time been an acknowledged power in global politics. Put differently Nigeria is a regional power while China is a world power (Akinterinwa, 1994). Indeed, the economic growth of China has made it also look for markets abroad and eventually found a worthy market in Nigeria, thus, opening a new era in the relations between the two nations. Without doubts their relationship should be seen as that between a big giant and a bigger giant, implying that Nigeria cannot be placed on the same pedestal with China.
Against this backdrop, our preoccupation in this thesis is to critically examine the extent Nigeria-China relations have influenced the inflow of foreign aid, direct foreign investment, volume of international trade and diplomatic relations; as well as the strategies Nigeria should adopt to maximize the benefits of the Nigeria China relations within the period under study.
1.1 STATEMENT OF THE PROBLEM
In recent years, with the rapid economic development of both China and African continent, the interaction between the two parties, which used to centre on political sphere, is now featuring cooperation in various areas, especially, in the economic. It is a general belief that the increasing Chinese investments of capital and technology in Africa will reasonably help to unlock the African continent’s vast resources and potentials (Ogunsanwo, 2007). Indeed, Chinese economic and political activity in sub-Sahara Africa is growing at an exponential rate (Taylor, 2006; Tull, 2006; Taylor 2004). In fact, China is now Africa’s third largest trading partner, ahead of the United Kingdom and only behind the United States and France. Importantly, the bulk of this growth in trade is driven by a desire to obtain sources of raw materials and energy to fuel the Chinese economy and for fresh export markets (Taylor, 2006; 2008). Interestingly, Nigeria is taking a fair share of the Chinese economic activities in the African continent.
Although formal relationship between Africa and China Started in 1956 when China commenced full diplomatic relationship with Egypt, Nigeria and China established formal diplomatic ties on February 10, 1971 with an understanding to abide by a set of five principles: mutual respect for each other’s sovereignty and territorial integrity; mutual non-aggression; non-interference in each other’s internal affairs, sovereign equality; and
peaceful co-existence (Musa, 2007). Subsequently, Nigeria and China have in recent times established a strong trading link. It has culminated in the signing of a Bilateral Trade Agreement (BTA) in 2001, a Strategic Partnership Agreement signed in 2005, a Memorandum of Understanding on Investments Cooperation between the Federal Ministry of Commerce of Nigeria and Ministry of Commerce of China in 2006; Economic Cooperation Agreement between Nigeria and Guandong Xinguang International Group of China, in 2006.
In 2004, Nigeria-China signed an agreement to develop Oil Mining Lease (OML) 64 and 66 located in the deep waters of the Oil Rich Niger- Delta. In an oil for investment deal, Nigeria agreed to offer China four (4) oil drilling licences in exchange for a USD 4 billion investment in infrastructure. China is buying a stake in Nigeria’s 110,000 barrel-a-day Kaduna oil refinery and building a rail road and power stations.
These various agreements came about as a result of the need for concrete measures to enrich the content of the existing bilateral cooperation between the two countries.
Resulting from the above, trade between China and Nigeria has quadrupled in the last seven years, even rose to $10 billion in 2006. A Chinese firm, the Chaoyang Heavy Machinery Group, in partnership with
Tancem Nigeria Limited, an indigenous company is establishing a cement plant at Mfamosing in Akamkpa Local Government Area of Cross River State. The plant is to produce 600,000 metric tones of cement annually, and worth N 7.68 billion investment. China’s incursion into Nigeria is for various reasons which are linked not only to its quest to buy oil fields for its fast growing industries but also because of the population of Nigeria which makes it a veritable market for China’s business deal with Nigeria, yet, scholars of international relations have not deemed it necessary to embark on an in depth research on this subject matter.
Regrettably, China’s increasing engagement with African countries at large and Nigeria in particular has gone largely unnoticed in African studies. Most of the existing literature on Sino-African relations deals with the Cold War Era (Konings, 2007). As a matter of fact, this defines a gap in literature as far Nigeria-China relations in this new era are concerned.
Notably, scholars like Lumumba-Kasongo (2007); Konings (2007); Gongyuan (1996); Polgreen and French (2007); Large (2008); Taylor
(1998a, 1998b, 2002, 2004, 2006a, 2006b, 2008); Cornelissen (2000); Payne
and Vency (2001); Alden (2007); Le Pere, ed. (2007); Sautman and Hairong (2007); Institute for Public Policy Research(2006); Gil, Huang, and Morrison (2007) Le Pere and Shelton (2007); Tull (2006); Ali (2006);
Mohan and Power (2008) and Campbell (2008) have in their separate studies commented generally on Asian-African and China-African relations without a recourse to Nigeria-China relations. Even when such scholars as Agbu (1994); Ogunsanwo (2007); Alli (2007); Fadina (2007); Kwanashie (2007) and Chibundu (2007) made some intellectual attempts in explicating China- Nigeria relations, yet, the subject to date remains paradoxically under- researched and unsatisfactorily addressed in literature. In deed, there remains often basic knowledge gap as none of the scholars was able to clamp down concretely on the implications of Nigeria-China relations and the impact of such relations on the political economy of both nations, especially within the time frame of this study which spans between 1999-2007.
Therefore, in the light of the above, the academic problem this study seeks to address so as to fill the existing gap in knowledge are crystallized in the following research questions:
- what are the implications of Nigeria’s economic diplomacy for Chinese oil interest in Nigeria?
- Has economic diplomacy impacted on the inflow of foreign aid and foreign direct investment to Nigeria from china?
- How has economic diplomacy stimulated trade between Nigeria and China within the period under review?
1.2 OBJECTIVES OF STUDY
The failure of various economic measures adopted by different governments has attracted intellectual discourse amongst political and economic scholars. Opinions are diverse on reasons for the inability of Nigeria to make progress in her developmental quest. While some blame it on the Foreign Policy thrust of Nigerian State, others hinge it on domestic political environment. The school of thought that blames it on the foreign policy thrust advocates a shift from pro-west economic relations to a more favourable Asian axis for solution to the Nation’s underdevelopment.
In response to this advocacy, Nigeria has adopted economic diplomacy as her foreign policy thrust since 1988. Nigeria’s economic diplomacy has seen her opening her foreign relations more with the Peoples Republic of China than most countries of the world, especially within the period under study.
The central objective of this study is to critically evaluate the implications and impact of economic diplomacy and Nigeria China relations under Obasanjo’s regime.
Specifically, the study has been designed to achieve the following detailed objectives:
- To determine the implications of Nigeria’s economic diplomacy for Chinese oil interest in Nigeria.
- To ascertain the impact of economic diplomacy on the inflow of foreign aid and foreign direct investment to Nigeria from China.
- To evaluate the impact of economic diplomacy on the volume of Trade between the two countries within the period under study.
1.3 SIGNIFICANCE OF STUDY
The whole process of managing relations with other states and international institutions including the complicated processes of perception of the environment from a locality or from a central office, assessment of immediate and long-term interests, balancing of internal and external pressures, testing of likely responses to proposed policies, final implementations, and perception of the environment once again in a never- ending sequence, Burton (1968) quoted in CDLCE, pos 204, unit 1, p.16.
Diplomacy is an aspect of international relations which Holsti (1983) “refers to all forms of interaction between the members of separate societies, whether government sponsored or not”. Furthermore, the conduct of a
nation’s international relations is determined by the country’s foreign policy which Frankel (1975) observes “is a dynamic process of interaction between the changing domestic demands and supports and the changing international environments”. A country’s foreign policy guides and shapes the behaviour of that country in international arena. According to Rosenau (1976), foreign policy may be “aggressive or submissive, long-range or short-range, economic or diplomatic”. In furtherance to the components that determine a nation’s international relations are the national interests. National interests can be divided into three segments; (a) national security (b) the protection and preservation of the welfare of the state, and (c) national prestige. National interest according to Obasi Igwe (1989) is “a situation, policy or decision considered to be primitive of the state’s ultimate aims”. Morgenthau (1962: 562), national interest is “defined in terms of national security and national security must be defined as integrity of the national territory or of its institutions”.
Nigeria’s economic diplomacy is couched on the primacy of economic development of the nation state. Any diplomatic ties, bilateral, multilateral, or institutional relations would be conducted in a manner or intention to impact on Nigeria’s human or material development.
The issues arising from Nigeria-China relation are; what is China’s interest in her renewed relationship with Nigeria? Is it for economic exploitation as an emerging imperialist? May be a desire to control a larger share of global market. Could China’s push
into Africa and the rest of the world be for the challenge of the hegemony, particularly, American overbearing influence?
This study is saddled with the responsibility of finding out the implications of Nigeria-China relations. This is important based on the common knowledge that international economic relations between the advanced industrial nations and the developing nations are conducted on unequal exchange leading to imperialism. This they do using “technical, commercial, capital resource and socio-political predominance over dependent countries…. This permits them to impose conditions of exploitation and extract part of the domestically produced surplus” (Theotonio Dos Santos).
The research will seek to reveal the trade and economic relations between Nigeria and China. This is aimed at determining the pattern and volume of trade between the two countries.
This work takes a keen interest in the inflow of Direct Foreign Investment from the nation’s dealing with China. It will examine the extent
of technological and industrial development of Nigeria as a result of her interaction with China and Chinese co-operations.
The study of Nigeria-China Relations has not been of great interest to Nigerian scholars compared with the abundant literature on America and British studies. The research is aimed at awakening and provoking further studies by intellectuals in this field of learning. If this is achieved, we will consider the study as successful.
The work will be beneficial to foreign policy makers, statesmen and diplomats who will examine critically the implications of policies and their executions in relations with countries, and in particular, the Asian-Tiger. Students of International Relations will find the research handy in their study of Nigeria-China Relations. This is apt, as China is indicating her interest in Nigerian Universities with the introduction of the study of Chinese language at Nnamdi Azikiwe University, Awka, Nigeria.
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