China and Nigeria: A South-to-South Cooperation?

China and Nigeria: A South-to-South Cooperation?

11.12.2012. China’s FDI towards Africa has undoubtedly increased. Nigeria itself has become China’s top 2 trading partner in Africa. Outflow of natural resources goes hand in hand with inflow of infrastructural investments. This is a South-to-South cooperation in its full glory.

 

China, the world’s second largest economy, has been gradually calling attention of global powers as its outward investments to Africa increases. Between 2005 and 2010 more than 13% of China’s foreign direct investment went to Sub-Saharan African countries. Not accounting trade between both parties, which amounted more than US$ 120 billion in 2010. Purposely or not, one of the main traders of the Asian giant is Africa’s second largest economy, Nigeria. 

 

Trade between China and Nigeria has witnessed remarkable growth since the beginning of this century. The bottom of US$ 2 billion in 2000 was replaced by nearly US$ 18 billion in 2010. Not surprisingly, 87% of China’s imports from Nigeria are oil and gas products, which demonstrate the Chinese interest for those two specific resources. The other way round has showed different figures, as China exports a variety of products to Nigeria, mainly manufactured goods.

 

Surely, this relationship has allowed both parties to achieve important goals. China has strived to diversify its oil sources. On the other hand, Nigeria has been seeking a more “south-to-south” cooperation, on where western dependency plays a less important role. Hence, in 2005, both parties agreed on a deal: “Oil-for-infrastructure”, as a way to provide natural resources needed by China, meanwhile improving what lacks most in Nigeria, which is infrastructure.

 

While it is still doubtful whether this deal has failed or not, in 2011, Nigeria had 50 infrastructure projects being developed by China Civil Engineering Construction Corporation (CCECC) besides more than US$ 10 billion invested in infrastructure. Not mentioning the railway, which links Abuja, the capital, and northern cities, the presence of China Geo-Engineering Corporation (CEC) and other small Chinese construction companies.

 

When looking beyond oil, the so called “south-to-south” cooperation has also boosted agriculture. In 2011 both countries agreed on a food security agreement, promoting a transfer of Chinese technology and knowledge towards the production of cocoa, palm oil and soil beans in Nigeria.

 

Being aware that China is expert in EPZ (Export Processing Zones) and SEZ (Special Economic Zones), which surely attract FDI and boost exportation, the forum on China-Africa Cooperation (FOCAC) of 2006 touched this topic, and China agreed on building three to five zones in Africa, including in Nigeria.

 

Nevertheless, China’s investment in Nigeria has huge rebounds. Chinese companies create new jobs while allegedly harming local smaller businesses. Nigerian roads and highways are upgraded, but the oil extraction process in the Niger Delta has devastating effects on environment. Hence three aspects should be pinpointed: trade-off exists, priorities need to be addressed and real insights remain a question mark.

 

Sources: www.oecd.org

Picture: www.oecd.org

 

Lucas Cury de Farias