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Xi-Led Growth? Nigeria at FOCAC 2018

The seventh Forum on China-Africa Cooperation (FOCAC) just concluded in Beijing last week. Themed “China and Africa: Towards an Even Stronger Community with a Shared Future through Win-Win Cooperation”, this year’s forum aimed to strengthen diplomatic ties between China and the 53 African countries in attendance, and renewed their commitment to stronger Sino-African trade and mutual development. The forum focused on 8 initiatives including: infrastructure connectivity; industrial promotion; capacity building; trade facilitation; health; green development; cultural exchanges; and security.

To this end, the forum’s attendees signed numerous bilateral agreements, the 2019-2021 Beijing Action Plan, and the Memorandum of Understanding (MOU) on the One Road (OBOR) Initiative. Among the many outcomes of the forum, China’s pledge of $60 billion in credit facilities to finance development in Africa stands out. This pledge aims to finance different development initiatives over the next three years and will be provided in the form of investment, financing by financial institution and companies and government assistance.

Chinese President, Xi Jinping, broke down the distribution of the funds partially, revealing that a quarter of the pledge will be interest-free loans, grants and concessionary loans. At the end of the forum, all the African countries in attendance left with new commitments from China. So what were the gains for Nigeria specifically?

Information and Communication Technology Infrastructure

One of the main outcomes for Nigeria from FOCAC this year is the signing of a $328 million financing agreement on the National Information and Communication Technology Infrastructure Backbone Phase 11 (NICTIB 11). The agreement between Galaxy Backbone Limited and Huawei Technologies Limited aims to “develop ICT in Nigeria”. This is a win for the Nigerian government because it is in line with one of Nigeria’s ICT targets in the National Economic Recovery and Growth Plan (ERGP) to increase the contribution from ICT and ICT-enabled activity to Nigeria’s GDP.

Power Infrastructure

Nigeria also came out of FOCAC with renewed commitment in construction of the 3050 megawatts Mambilla hydropower project. The Mambilla hydropower project is set to be the largest hydropower plant in Nigeria. CGCC, the Chinese company handling the project’s construction, will be starting work on the plant in 2019. This may also be another step towards meeting power sector targets as set in the ERGP, since the hydropower plant will have a positive impact on the power sector, as well as on agriculture, food production and technology.

At FOCAC, Nigeria and China signed over 20 MOUs proposed by the Nigerian Investment Promotion Commission (NIPC), the Nigerian National Petroleum Corporation (NNPC), and Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA). Nigeria also signed an MOU for the One Belt One Road Initiative (OBOR), which holds significance for Nigeria’s connectivity and collaboration with China, especially in the transportation sector. In 2015, China pledged RMB 100 million in humanitarian and military support to Nigeria in Johannesburg as part of China’s support in the fight against Boko Haram. This year, China pledged an additional RMB 50 million. However, it is unclear how and when the funding for security will be disbursed.

Given these pledges from the renewed vigour in Sino-Nigerian relations, what should Nigerians pay attention to?

Cutting Our Coat to Our Size

Nigeria’s growing debt and the long-term impact of indebtedness on the economy should be high on the agenda of the Nigerian government. As of December 2017, the Nigerian Bureau of Statistics stated that in the disaggregation of Nigeria’s foreign debt, $2.09 billion came from the Exim Bank of China credited to the Federal Government alone. The Debt Management Office of Nigeria places Nigeria’s debt stock with China Exim Bank at $1,930.98 million as of June 30, 2018. Since then, Nigeria has negotiated or is negotiating for more loans among which is the $3.5 billion Mambilla hydropower loan. With the new pledges from FOCAC, Nigeria’s debt is increasing. However, Nigeria has no strategic plan to manage and repay Chinese loans specifically. Additionally, Nigeria has also accumulated debt from other sources including France’s AFD, Japan’s JICA as well as other foreign development agencies. These debts will need to be repaid in due time.

Nigeria also imports more from China than it exports to China and, as a result, the trade imbalance coupled with debt is not a sustainable economic arrangement. During FOCAC, the threat of the ‘debt trap’ was addressed by President Xi and China reiterated its commitment to loans that have ‘no strings attached’, focusing on a relationship with the continent based on mutual benefit, ‘win-win’ outcomes and development which will be in line with the OBOR initiative, the African Union’s Agenda 2063, the United Nations Sustainable Development Goals, as well as the national development strategies of African countries. FOCAC negotiations also touched on the trade imbalances between Nigerian and China and a plan of promoting non-resource trade to correct them. Nigeria currently receives about 17 per cent of the distribution of Chinese investment in Africa and to whom much is given, much is expected.

Learning from Others

China is known to be very tough on getting returns on investments and repayment of debts in good faith. Nigeria has to learn from countries such as Sri Lanka, Zambia and Djibouti to make good on debt repayments and investment returns. Sri Lanka lost one of its ports to China due to the inability to repay loans and assistance for the port, whereas, Malaysia cancelled two Chinese-funded projects related to the OBOR due to fears of indebtedness and strict conditions, as did Pakistan, Nepal and Mexico. Nigeria, on the other hand, seems confident that the debt to China will be repaid.

On the issue of debt, President Buhari stated that the ERGP will synchronize with infrastructure projects and what he called “sound housekeeping and fiscal prudence” to ensure that Nigeria gets out of debt. However, the problem of corruption among public officials coupled with a lack of continuity and/or maintenance of infrastructural development projects might challenge any prudence and housekeeping; Nigeria must think deeply about what a debt to China means. Nigeria needs to actively push for non-resource-based trade with China and greater participation in the industrial and capacity building initiatives stipulated in the 2019-2021 Beijing Action Plan like Lubab Training Centres, scholarship opportunities and import-export trade fairs aimed at correcting these imbalances.

Better People-to-people and Cultural Exchanges

One of the aims of FOCAC this year was to improve the business relations between China and Africa by promoting more people-to-people exchanges. For Nigeria, this is an area in need of improvement. It is still very difficult for Nigerians to do business in China, given China’s stringent visa policy towards Nigerians. FOCAC presented a perfect opportunity to negotiate new visa facilitation agreements to enable Nigerians to do business in China with fewer hindrances, and to reduce the incidence of visa overstaying and the number of undocumented Nigerians in China. One of the imperatives to improving Sino-Nigerian relations involves changing and challenging the negative narrative surrounding Nigerian businesspersons in China. Unfortunately, visa facilitation was not high on the agenda at the FOCAC because the focus was on the money. Until Nigeria improves this aspect of business, the Nigerian community in China’s problems may remain unchanged.

The Global Table

In Nigeria, as well as Africa as a whole, there needs to be increased awareness that Africa brings a lot of value to the global table. There is a reason China focuses on improving its relations with the continent specifically. Beyond loans and grants, Nigeria should be pushing for a more sustainable partnership, and should be more strategic by taking advantage of the overall international climate—Nigeria can do this by, for instance, using the trade wars between China and the US as an opportunity to increase our exportation to China, as Hannah Ryder suggests. If the goal is truly about win-win cooperation and making Sino-Nigerian relations a comprehensive strategic partnership, sustainability should be the high on the agenda. Nigeria’s non-resource exports to China should increase, and bilateral cooperation should be strengthened by pushing for visa facilitation agreements. The latter would streamline visa mechanisms for Nigerian entrepreneurs, business owners, academics and researchers, and others. Our focus should be on skill transfer and knowledge sharing, rather than on loans and grants. Ultimately, China needs Africa as much as Africa needs China