Nigeria: How Real Are Chinese Investments in Nigeria?

In recent times, there has been growing concern over the genuineness of Chinese involvement in Africa and Nigeria in particular. The concern is borne out of the fact that China in its appetite for oil, in particular, to fuel its growing economy, is busy buying oil blocks and mineral resources from existing investments at any cost.

The argument is that most Chinese companies are not ready to go into exploration which is very risky and capital-intensive. As a result, many believe that this will not lead to the ultimate development of the continent as well as generate the much needed employment and technological transfer for the continent's growing population.

Truly, if China on continuous basis buys from existing facilities, when the proven reserves of crude oil in the country are exhausted, what happens to the unproven reserves? Who then will invest in it? But the widely accepted opinion about the aggressiveness of Chinese investment in Africa is not necessarily supported by available data. All in all, Africa does not account for a big proportion of China's global activities.

According to UNCTAD Statistics, Chinese investment in Africa reached its height in 2008 when Africa accounted for almost 10 per cent of its total global Foreign Direct Investment from the 4.3 per cent in 2004. But in the following year, the figure fell roughly four-fold and in 2010, the number was almost negligible at 0.3 per cent.

A country by country breakdown of Chinese investment in the African continent according to the Heritage Foundation (China Global Investment Tracker Interactive, January 2012) shows that in 2012, China's investment in Africa focused primarily on five countries - Nigeria, Algeria, South Africa, Democratic Republic of Congo and Niger.

The breakdown by country showed that Nigeria has had $15.42 billion net investment from China, Algeria $9.23 billion, South Africa $6.64 billion; Democratic Republic of Congo $6.55, Niger $5.26 billion, Egypt $3.27 billion, Libya $2.68 billion, Zambia $2.49 billion, Sudan $2.210 billion, Ethiopia $1.9.

In all of these, among China's major investors in Africa are CNOOC (Nigeria), Sinopec (Angola), China Railways Construction (Nigeria), Sinomach (Gabon), CITIC and Chalco (Egypt), China Nonferrous (Zambia), Minsheng Bank (South Africa), SinoSteel (Zimbabwe), CNPC (Niger and Chad), and China Metallurgical and Sinohydro (DRC). All these enterprises invested in Africa actively in the period 2005-2008, but in 2009- 2010, their presence waned and in 2011, the only big Chinese investor in Africa was the China Railways Materials Commercial Corporation in Sierra Leone with total investment of $260 million.

Nigeria in entering into contractual agreement with these new found friends called Chinese enterprises, must ensure that all the terms of the deals are open and transparent. Nigerians, in particular must be carried along to avoid unnecessary suspicion. At the moment, the way most of the transactions are entered into do not suggest that the contracts are open, transparent and with good intentions.

When the Nigerian government did the last oil bid round, most of the Chinese and other Asian companies promised out of the box investment in other sectors of the economy, but none has been fulfilled. Some of those mouth-watering promises will never be met because the companies involved have long left the shores of Nigeria.

Strategic thinking requires that those involved in negotiating deals with the Chinese have at the back of their minds the ultimate goal of a sustainable economy for Nigeria.

Of course, this is not to say that business deals and investments in mines and oil fields by the Chinese are not important.

Trade between China and African countries has surged by an average annual 30 per cent for much of the past decade, driven by China's appetite for oil and minerals, and its sales of clothes, cars, telecommunications and other goods to African markets. Investments in mineral or oil fields must go beyond simply buying up natural resources.

Nigeria in its attempt to attract investment from China must note what is happening around the continent and not confine its investment drive with China to oil and gas. China's largest bank, ICBC at the moment owns 20 per cent of South Africa's Standard Bank. Shenzhen-based Huawei Technologies, China's biggest telecoms equipment maker, is pushing south from its established stamping ground in North Africa. Peer ZTE Corp. is another Chinese player growing in importance in Africa.

None of these companies have signified any intention to set up in Nigeria; they are only selling finished products. All the companies that are investing in Africa are making a lot of money. China knows too well that with developed markets either saturated or entry requirements too high, its firms see Africa as a great untapped market and it is exploiting to its advantage.

Based on perceived benefits from China, the Federal Government last month called for enhanced economic ties with the Chinese Government. The Minister of Foreign Affairs, Ambassador Olugbenga Ashiru, made the call at a meeting with Mr Zhong Jianhua, Special Representative, African Affairs for China, in Abuja.

Briefing newsmen after a closed-door meeting between both parties, Ashiru said that Chinese government's investment in key sectors would facilitate economic growth. He said that both parties had also agreed to enhance relations at the international level. The developing relationship between Nigeria and China should go beyond rhetoric, but based on transparent deals open for all to see; not just in oil blocks but across all sectors of the economy. That is the only way Nigeria can truly benefit from China.

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