Globalization has forced countries to form economic relationships that promote bilateral trade activities across borders. As a result, countries in different continents cooperate to form shared growth and development goals that lead to financial sustainability. Nigeria and China’s diplomatic relations are a result of bilateral trade activities between the two nations since the 19th century. These relations have enabled the two countries to excel in bilateral ties as they engage in international trade that has led to sustainable economic and development agreements. Bilateral trade activities between China and Nigeria arose from the political engagements that created a foundation for China to penetrate the Nigerian economy. Although trade has been the catalyst for the bilateral relations between the two nations, China has dominated due to the trade imbalance that continues to favor it. For instance, China’s technology and infrastructure developments are above that of Nigeria. Thus, it is challenging for Nigeria to compete favorably with China. A historical overview of the relationship between Nigeria and China reveals the impact that the latter has had on economic and development activities in Nigeria despite the difficulties faced by both nations as they pursue sustainable economic and diplomatic relations.
Literature Review
China’s diplomatic relations with Nigeria is based on mutual benefits that both countries enjoy. According to Alves (2013), China utilizes its financial aid policy as an economic strategy that enables it to benefit from Africa’s rich resources. However, the Chinese government has continuously framed its financial aid as a win-win strategy that profits countries that have entered an economic partnership with it. China prides itself in its ability to provide innovative and technological advancements to its beneficiaries, who are mostly underdeveloped nations that lack essential infrastructure. Isaac et al. (2020) argue that the bilateral and multilateral relationship between China and Nigeria is significant given that Nigeria is a developing nation that benefits from trade relations. China provides essential infrastructure to Nigeria in exchange for access to the resources that the Chinese lack. For instance, China has access to Nigeria’s oil as part of its trade agreement whereby the Chinese companies can settle in the country until they complete the various infrastructure projects. China’s accessibility to Nigeria’s oil industry enabled it to gain extensive access to different sectors within the economy, which has contributed to the growing trade imbalances experienced in Nigeria.
China capitalizes on the poor infrastructure in Nigeria by paving the way for Chinese construction companies to develop and market their products to Nigerians. Ajakaiye et al. (2009) aver that China uses its credit lines to sustain long-term contracts with Nigeria and profit off of the access to resources that are crucial in maintaining its economic developments. This strategy provides China with an advantage as it can use its trade relations to penetrate other sectors in Nigeria. Although African nations such as Nigeria may benefit from the provision of large-scale infrastructure by China, beneficiary countries are, in most instances, indebted to China, creating a trade relation imbalance (Osondu-Oti, 2018). The imbalance affects Nigeria since it does not have the advanced technology and infrastructure as China to seize the existing economic opportunities.
Private investors from China have penetrated the Nigerian market by forming joint ventures and partnerships with wealthy Nigerian businesspeople. Obiorah, Darren, and Yusuf (2008) assert that China has developed more than 30 privately owned and joint organizations in Nigeria with the majority of these ventures benefitting from the oil and gas industry, construction and technology, and the service sector. The majority of the Chinese investors continue to benefit from the incentives provided by the Nigerian government as a measure to attract more FDI from the country. This is a disadvantage to Nigerian private investors who encounter financial challenges in their attempt to compete with the Chinese. According to Ayoola (2013), the Nigerian-China partnership is one-sided and only benefits the Chinese as it creates animosity between investors from the two nations. For instance, Chinese companies provide products and services at a relatively low price compared to Nigerians within the same industry. The price disparity is associated with the accessibility to resources; as the Chinese can import raw materials at lower costs compared to their Nigerian counterparts.
At face value, China’s investments in Nigeria may be perceived as a profitable venture that improves Nigeria’s infrastructure in major urban centers. Odeh (2013) argues that the fact that China is mainly concerned with the mineral resources in Nigeria such as oil and gas is a clear indication that it uses infrastructure developments as a scapegoat. China is known to invest in countries that it can access natural raw materials by blinding its host with the idea of enhancing their economic growth and development. However, this partnership fails to benefit Nigerians as Chinese investors implement labor policies that exploit natives. Although China utilizes the natural resources from Nigeria, it imports law quality resources and goods to the country; thus, providing citizens with substandard equipment, machinery, and manufactured products.
Even though China’s economic models in Nigeria have improved the manufacturing sector, the investor’s spiteful approaches overshadow the positive impacts of doing business. China’s imports of low-quality products and goods into Nigeria negatively affect its citizens while the Chinese economy continues to expand. The positive effects of increased production, manufacturing, and technology industries fail to assist natives in narrowing the unemployment rate in the country (Oke et al., 2019; Sangosanya, 2011). The quality of goods and services imported by Chinese investors are of low quality; thus, diminishing the value of domestic manufacturers who invest millions of dollars towards their products. For instance, Chinese investors provide the Nigerian market with low-quality produce at a cheaper price denying local manufacturers the chance to sell their goods at face value.
The fragmented relationship between Nigeria and China has contributed to socio-economic and political issues in Nigeria, leading to stalled economic growth and development. Critics argue that China’s involvement in the Nigerian economy is a sign of neo-colonialism, citing that the takeover by Chinese investors is a repeat of what westerners did to Africans during the colonial period (Thompson & Olusegun, 2015). China has profited from the large Nigerian economy and GDP by entering into multilateral and regional trade agreements that give it the power to exploit the exciting opportunities in the country. Nnanna (2015) explains that the West African Monetary Zone and Economic Community of West African States have made it possible for Chinese investors to establish multi-million dollar investments in the country without any restrictions. Policies implemented by the two organizations have strengthened the economic partnerships as the Nigerian government continues to remove trade barriers and tariffs that would otherwise make it challenging for Chinese investors.
The strategic policies designed by both China and Nigeria allow China to exploit the latter’s resources. However, unlike in the past where the Western world exploited Africans, the Chinese dedicate their resources towards expanding the domestic economic growth of Nigeria. Consequently, Nigeria has slowly begun to shift its trade from the Western world to Asian countries such as China. Ogunkola et al. (2008) affirm that even though the economic relationship between Nigeria and its Western counterparts has existed for years, the trading relations have done little for the country compared to what China is doing. China’s involvement in Nigeria has expanded its construction, manufacturing, and production industries.
China’s primary focus in Nigeria has been to capitalize on the growing GDP and increased oil-producing regions in the country. As a result, the bilateral trading activities have led to the development of non-oil industries such as technology and manufacturing sectors. According to Nnanna (2015), the non-oil sector grew by 3-4 percent at the beginning of 2000 and significantly increased to 8-9 percent by mid-2000. This economic increment is attributed to the bilateral trade agreements which produced fiscal and monetary policies that supported Chinese investors in Nigeria. The main source of attraction for FDI from China is energy reservoirs, agriculture and manufacturing industries, and the consistent growth in the GDP and disposable income (Ibrahim & Sayuti, 2017). On the other hand, Nigeria is motivated to support China’s continued economic revolution and national dominance through its large-scale development projects.
The trade imbalance between China and Nigeria continues to frustrate domestic business people and increase unemployment in the nation. Ibrahim (2019) explains that the bilateral trade agreements between the two countries mainly favor China since its accessibility to Nigeria’s natural resources boosts its position in the international trade markets. The different economic structures support China to excel more than Nigeria since the latter mainly depends on oil production, whereas the Chinese economy prevails on manufacturing and production. China’s economic growth and stability are enhanced by the bilateral relations it has with Nigeria. As a result, China’s position in the international market enables it to exploit Nigeria’s resources despite its efforts to uplift the country’s economic growth and development.
The persistent trade imbalance between Nigeria and China will continue to be a major problem unless both governments decide on an effective legislative. Oke et al. (2019) argue that the Nigerian government needs to sign a trade agreement with Chinese investors to make it mandatory for their firms to employ and invest in Nigerian human resources. Therefore, foreign companies will be expected to engage Nigerian workers and give them priorities when employment opportunities arise. This will ensure that the Chinese do not saturate the market while contributing to the issue of unemployment in Nigeria. For instance, if a Chinese firm has been contracted to extract oil, it should be expected to train Nigerian workers on the different methods required to complete the task.
The Future of China-Nigeria Relationship
Nigeria’s relationship with China is another example of its dependence on bilateral relations with countries outside Africa. According to Oke et al. (2019), Nigeria thrives in the bilateral opportunities presented by FDIs from China, particularly through oil and mineral resources. However, the economic imbalance between the two nations makes it difficult for Nigerians to profit of Chinese investments in the country. Moving forward, it would be essential for the Nigerian government to revise the foreign investment policies that govern its relationship with China. Bartels et al. (2009) assert that Chinese foreign policy in Nigeria is particularly beneficial for China since it investors encounter few domestic and international competitors. Therefore, policymakers must develop and implement strategic measures that support domestic business people as much as they encourage China’s FDI. The economic relations between Nigeria and China have continued to grow since the new millennium allowing Nigeria to capitalize on the stable FDI from China.
Stringent laws to govern China’s investments in Nigeria will ensure that there is a balanced win between the two nations. The unstable foreign policies in Nigeria affected the country’s economic sustainability during mid-2000 due to the increased imports of Chinese goods to Nigeria compared to the number of goods exported from Nigeria to China (Taylor, 2007; Ibrahim & Sayuti, 2017). The trade deficit that exists as a result of the bilateral trade policies affects domestic industrial producers and limits their ability to profit off of the growing economy. Shifting the focus from trade policies that favor China to amicable trade guidelines that promote local industrial producers in Nigeria will eliminate the fragments that negatively impact Nigeria-China relations.
The Nigerian government is likely to diminish the domestic markets and producers if it continues to support FDI policies that only favor the Chinese economy. Achieving economic balance should be the main focus for the government as this will eliminate the international and regional business regulations that create an imbalance in the Nigerian economic structure. According to Oyeranti et al. (2011), the current Nigerian administration is investing its efforts towards strengthening Nigeria’s domestic economy by promoting locally produced goods and services in the agriculture and manufacturing industry. This is evident in the government’s attempt to implement sanctions that stop the importation of certain products that can be found in the Nigerian markets.
Nigeria-China partnership has the potential to revolutionize bilateral and multilateral trade activities in West Africa. Ekesiobi et al. (2011) describe Nigeria and China as nations that have huge economic potential within their continents and can grow to be among the highest economies in the world. Both countries have a high GDP with increased spending power. Thus, they have better chances of dominating the international trade markets if they invest in bilateral trades with each other. China is among the leading global trade investors that are contributing to the technology and infrastructure developments in developing nations, and Nigeria is amongst the richest countries in terms of natural resources. Therefore, the Nigeria-China partnership can change how critics perceive bilateral trade activities between developing and developed countries.
Compared to other nations that have partnered with China, Nigeria appears to rise faster in terms of economic and infrastructure development. Nigeria has benefitted greatly from its partnership with China due to the socio-economic impacts that have led to positive changes in the lives of Nigerian citizens. However, the Nigerian government needs to recognize that the Chinese FDI’s efforts are not as generous as they are made to appear (Ayoola, 2013). Nigerians will continue to suffer from the trade imbalance effects of Nigeria-China relations if effective measures are not put in place to govern labor and business practices by private Chinese investors. For the Nigeria-China relationship to be sustainable in the future, the Nigerian government must consult technical experts to perform a cost analysis to ensure that contracts to both domestic and foreign companies are awarded at a fair cost (Oyeranti et al., 2011). A cost-benefit analysis of projects will provide the country with a scientific and realistic overview of how the country is performing in its engagements with foreign investors and multilateral organizations.
Chinese firms benefit from how easy the Nigerian government has made it for them to capitalize on the economic investments and development contracts available in the country. This strategy will negatively impact business activities by domestic contractors and eliminate healthy competition by other foreign companies (Mlambo et al., 2016; Ogunsanwo, 2008; Idris & Chukwuka, 2014). As a result, China will have leverage over the Nigerian economy if the government fails to reconsider its trade policies. The Nigerian government has to review how it treats its local contractors when awarding investment opportunities. For instance, one of the main issues affecting Nigerian citizens is the increased rate of unemployment, which the Nigerian-China relation is contributing.
The problems arising from the negative externalities related to Chinese investors in Nigeria undermine the possibilities that this partnership has towards enhancing Nigerian’s socio-economic growth. Dalibi and Bello (2017) propose that the government should establish an effective national agency that will govern and audit the performance of Chinese and Nigerian corporations in the country. The oil production and manufacturing industry have significant implications on the environment, which business firms must observe and implement policies to curb their effects. Economic development at the expense of Nigeria environmental sustainability will have more harm to the country than good. Thus, the national government needs to regulate how Chinese investors and domestic contractors engage in sustainable activities. Moreover, if the government fails to establish effective regulations that support bilateral and multilateral trade activities, Nigeria will lose FDIs from China.
Economic agents in Nigeria will continue to benefit from China’s FDIs if appropriate measures are put in place to protect the domestic market. China’s transformative investments are a great source of financial aid for Nigeria’s infrastructure and social-economic developments; therefore, sustaining this relationship is important for the welfare of the country (Osondu-Oti, 2018). Thus, the Nigeria-China relation is likely to transform the country’s economy through increased export from Nigeria to China and employment opportunities and revenues. However, this will only be possible if the Nigerian government diminishes the over-dependence on foreign aid and corrupt activities.
Conclusion
China-Nigeria relations tend to benefit both nations in terms of economic developments. However, the imbalance in Nigeria’s economic structure allows China to benefit from its market and natural resources. The giant African economy has become vital in sustaining China’s economy as investors use natural resources to enhance their production and manufacturing activities. Through the importation of natural resources such as oil, China has managed to become a threat in international trade and sustain its economic growth. On the contrary, Nigeria is blinded by China’s attractive partnership as the nation enjoys the extensive infrastructure and technology developments initiated by Chinese investors. Nigeria’s economic development and growth have improved since it began its partnership with Nigeria at the beginning of the new millennium. Despite the positive and negative implications associated with this partnership, Nigeria still has the potential to profit from China’s investments. Developing and implementing effective strategies that govern Chinese business activities in Nigeria will ensure that the Nigeria-China relations do not negatively impact domestic investors.
References
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