China’s Foreign Investment In Nigeria

China’s Foreign Investment In Nigeria

China indeed started its formal trade with African countries in the late 1950s. Main partners were countries in North Africa, particularly Egypt.

Nowadays, most African countries are more likely to export primary products and import consumer and capital goods from China.  This trade pattern didn’t change until very recently.

Nigeria, for instance, exports cocoa beans, rubber, cashew nuts, hide and skin, and many other agricultural products and oil. China does export substantial quantities of low-cost manufactured products, meeting Nigeria’s local demands that mirrored a declining self-sustaining economy.

This also ended in severe trade imbalances between both countries. The trade imbalance with China is really a structural problem peculiar to most African countries. For recompense, China utilized her economic assistance programs.

According to data collected from China Customs, the bilateral trade volume existing between China and Nigeria as of 2016 was US$25.13 billion, up by 15.6%, from 2000 to 2010, among which China’s export to Nigeria was US$18.85 billion, up by 23.9%, whereas China’s import from Nigeria was paltry US$280 million, down by 47.3%. China has surplus trade of US$6.57 billion. China largely exported motorbikes, machinery equipment, auto spare parts, rubber tires, chemical products, electronic goods, textiles and garments, steel to Nigeria…

China’s increasing presence in Nigeria has encouraged much speculation concerning the nature of the emerging partnership model.

Nigeria General Situation

Economy

The economic conditions of Nigeria have advanced over the past few years because of the rapid phase of industrialization. The economy of Nigeria also improved tremendously with foreign investment aided by top-quality research and development.

Nigeria was a British colony for a considerable time frame. During this phase, major recyclables and minerals were exported to foreign countries together with food grains which sooner or later spearheaded the growth of slavery and exploitation of training class because of the Europeans. After the achievement of independence in Nigeria, efforts were created to revive the economic growth of the country by having a set of economic reforms. It’s important to note that ahead of the discovery of oil in Nigeria, the nation survived mainly on its agricultural production. The present G.D.P growth rate continues to be 7% from the past few years.

 

Impact of China FDI on Economic Growth in Nigeria

With Chinese FDI, and trade with Nigeria, it is hoped this will lower Nigerian poverty and drive growth.

A growth-driver framework that identifies 5 key groups of variables that, if worked on positively, they can drive sustainable economic growth, allows you evaluate Nigeria’s prospects.

For sustained growth and development to happen, obvious progress should be achieved from the areas of policy choices, institutions, human capital, entrepreneurship, culture, and leadership.

  1. Policy Choices:

Several data collected, advocate that African policymakers generally and Nigerian particularly, including national and local officials, aren’t setting policies that may have the strongest possible impart on a long-term economic growth for the widest range of the citizens.

Though many of the current policies being pursued may well benefit Nigeria and considerably contribute to economic growth in some areas, the strategies often neglect essential long-term needs, which is an important segment of the population, as well as the targeting of essential sectors producing a diversified economy.

For example, though evidence demonstrates that much profit may come to Nigeria by stimulating agriculture through some of the same policies that helped benefit an industrializing China, a sturdy agricultural development program remains in sight. Likewise, although development models claim that a robust middle class is the mainstay of growth, the Nigeria government has not focused its attention on providing basic needs to the broad segment of the population.

  1. Institutions:

The evidence demonstrates that Nigeria is dramatically underperforming despite strong revenue flows from high-priced crude oil exports from 2010-2014. Various bureaucratic obstacles as well as lack of strong institutions have led to constrained progress in the areas of infrastructure, agriculture, and technology transfer. Similarly, widespread corruption has not transferred wealth to the lower classes and has stifled foreign direct investment in the nonpetroleum sector. Until Nigeria can produce dependable, accountable, and transparent institutions, a free-market system that encourages investment, diversification, and competitors are unlikely to emerge.

 

  1. Human Capital:

Human capital development, language barriers, and cultural differences weigh heavily against the transfer of technological skills and education from Chinese to Nigerian citizens. Since cheap Chinese labor can frequently be used, big industrial projects seldom transfer skills to local African populations.

  1. Entrepreneurship:

Of all of the variables which usually lead to sustained economic growth, we can claim that a strong degree of progress continues to be made in the development of Nigerian entrepreneurs.

Some Nigerian businessmen have learned to export successfully through the use of Chinese models and have absolutely profited by partnering in joint ventures with the Chinese. Nevertheless, language and cultural barriers have led to relatively small and educated elite are the primary beneficiaries.

  1. Culture/Leadership:

Nigeria’s elite officials have made China’s engagement significant, however, the strongest leadership have been seen from the Chinese side.

African leaders have dictated to the Chinese which development projects they will like to undertake, however, the absence of true leaders that are willing to stand up and give coherent long-term development strategy that adequately addresses the needs of the majority of Nigerian citizens remains an integral challenge.

Nigeria’s rampant corruption also has proven to be a life-threatening cultural obstacle that has to be overcome if Nigeria is to positively leverage its demands vis-à-vis China.

 

Nigeria’s priority is in developing the capability to better manage its very own policies toward China’s engagement.

Nigeria must realize that China’s engagement accounts for a unique probability to considerably expand its development and articulate a thorough strategy that addresses its long-term needs.

The Nigerian government should sidestep short-term fixes and front-loaded transactions though using Chinese and move beyond arrangements that focus exclusively on the petroleum sector.

High commodity pricing is only a momentary vehicle which could be utilized to push Nigeria’s economy into a more economically diversified state, which is a true mechanism for sustained growth.

 

 

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