Nairametrics| Nigeria on Wednesday announced China had agreed to invest about $40 billion in infrastructure projects in Nigeria. The decision is thought to have contributed to Nigeria’s decision to severe ties with Taiwan.
Nigeria’s trade relationship with China has been mostly one-sided over the years according to data from the National Bureau of Statistics. Nigeria currently imports on average about 8x more from China than it had exported. In fact, in the third quarter of 2016 Nigeria imported 33 times more than it exported to China, showing just how much gulf currently exist between both countries.
For China, Nigeria has been a melting point for a lot of its exports to Sub Saharan Africa. From technological services to finished articles, Nigeria has become a dumping ground for Chinese companies looking to expand their tentacles in Africa.
According to our intelligence, most utilities in Nigeria today rely on Chinese telecommunications giant, Huawei to power most of their technological needs, such as mobile phones, specialized apps, billing software, caller back tunes and other telecommunication services. For a lot of these Utilities, the Chinese angle provides them a cheaper option which also includes flexible payment plans and in some cases moratorium on payment for services already rendered. It’s a deal most Western businesses such as Ericsson, Alcatel can’t meet who incidentally have lost billions in business from their Chinese competitors.
While most Chinese products and services appear cheap they often include hidden costs and fees which often go unnoticed having been embedded in the hundreds of pages of fine prints laggardly ignored by lawyers. In one particlur story that made rounds in the telecoms industry, one of the top GSM companies fired their legal team for signing off on deals that they did not review in detail, only to find out later that it included license fees for any changes made to system spec. As is often the case, the Chinese make their customers rely so much on them, it is often more expensive to severe contracts than to renegotiate them. An ordinary software upgrade or integration to third-party applications typically attract fees and in some cases an outright refusal feigning integration issues as a reason.
The Buhari government does need China if it plans to achieve its infrastructural developmental goals. However, what should be a concern is that it will achieve these objectives to the detriment of local companies. For example, most local manufacturers are unable to compete with their Chinese counterparts who are able to secure loans as low as 2% for a longer term tenure, giving them the financial muscle to bid for jobs at a cheaper rate against local competitors.
The construction sector also could take a further hit if the deal from China goes through. Nigeria’s construction industry has been in recession for almost two years costing the sector thousands in job losses.
Chinese construction giant, CCECC is already well established in Nigeria building roads and bridges that otherwise used to be done by long-established companies such as Julius Berger.Just last year, President Buhari was at the flagging off ceremony of the Nigerian Railway Modernization Project with CCECC President Yuan Li also in attendance. The railway modernization project in Nigeria spans 1,315 km from Lagos in the south, through the capital Abuja, and to Kano in the north. It was said to be the largest single overseas construction project China had ever contracted at the time (formally signed in October 30th, 2006), with the total contract value of US$8.3 billion. The construction of the railway accumulated lots of valuable experience for CCECC, and established a good foundation for the construction of the Coastline Railway Project and Lagos-Ibadan Railway Project.
While Nigeria’s severed diplomatic ties with China may seem expedient at this time, it will be fool hardy to think that the one China policy is only limited to how it wants the world to relate to states that seek independence from Mainland China. More often than not it also means any relationship they enter with the developing world favours only one country.