This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
PERSPEKTIF
Available online http://ojs.uma.ac.id/index.php/perspektif
Economic Ties between China and Nigeria: A Study of President Muhammadu Buhari's Administration from 2015 - 2022
Benjamin E. Agah & Francis A. Ikenga
Department of Political Science, Delta State University, Abraka, Nigeria Received: January, 22 2023; Reviewed: March, 08 2023; Accepted: March, 30 2023
Abstract
The study focused on China-Nigeria economic ties as well as long-term democratic stability in Nigeria. The study took a traditional data collection approach, which included a careful and methodical investigation of secondary data. The findings show that Nigeria suffers as a result of China-Nigeria relations. The study also revealed that China's economic goals are driven by strong political, ideological, and economic ambitions rather than altruism.
Although China has been extremely helpful in providing loans for Nigeria's critical infrastructure development, there is a risk of debt trapping due to Nigeria's political class' proclivity to mismanage collected funds and ensure that all debts are paid back. The research ended with the following recommendations: Nigerian officials should make the most of Chinese investment in infrastructure development in order to encourage sustainable growth in the country. In addition to creating an open, secure, and politically stable macroeconomic environment, the Nigerian government must craft comprehensive and alluring investment policies. Access to carefully crafted repayment plans for the loans obtained from China to fund infrastructure projects must be available to Nigerians.
By doing this, the governments will be held accountable and responsible. To avoid damaging future generations, measures should be made to ensure accountability in the utilization of any loans obtained. All loans should be appropriately allocated to initiatives that enhance the welfare of the populace.
Keywords: Loan; Debt; Development; Infrastructure; Democratic stability
How to Cite: Benjamin E. Agah & Francis A. Ikenga. (2023). Economic Ties between China and Nigeria: A Study of President Muhammadu Buhari's Administration from 2015 - 2022. PERSPEKTIF, 12 (2): 354-366
*Corresponding author:
E-mail: faikenga@delsu.edu.ng ISSN 2549-1660 (Print)
ISSN 2550-1305 (Online)
INTRODUCTION
China and Nigeria's current economic partnership is sometimes described as mutually beneficial (Agubamah, 2014). In 1971, Beijing and Lagos established diplomatic relations to end the hostility caused by China's support for Biafra during Nigeria's civil war, which lasted from 1967 to 1970. In 1972, a Nigerian delegation visited Beijing and signed a long-term agreement for commercial and technological cooperation. Every president of Nigeria has visited China since the establishment of the fourth republic in 1999.
Taiwan was declared an inalienable part of Chinese territory in a joint declaration issued by China and Nigeria in 2005. China backed Nigeria's bid for permanent membership in the United Nations Security Council in 2015, and Nigeria backed China's stance in Pacific territorial disputes. A number of Niger Delta initiatives have also received military assistance from China (Ramani, 2016; Umejei, 2015). Good political connections have benefited the economy, and vice versa. Several companies with headquarters in Hong Kong have made investments in Nigeria since the country's independence. Some were born in China but moved to Hong Kong after communism was established, and two are still active in Nigeria. The Lee Group manufactures steel, ceramics, plastic bags, shoes, and bread.
Western Metal Products Company Limited (WEMPCO), the second company, is involved in ceramics, building materials, and hospitality.
The Tung family founded Africa's largest cold- rolled steel mill in 2015.
In 2006, China and Nigeria signed the first Memorandum of Understanding on the establishment of an African strategic partnership. As a result of the collaboration, an oil-for-infrastructure agreement was signed, and Chinese companies were given priority access to oil-processing licenses. Large Chinese loans have resulted from presidential trips.
President Jonathan's trip to Beijing in 2013 resulted in a $3 billion infrastructure loan, including airport expansion in Lagos, Kano, Abuja, and Port Harcourt. Nigeria received a $6 billion infrastructure loan following President Buhari's visit in 2016. More Chinese companies are establishing themselves in Nigeria. In 2013, 208 Chinese companies were registered in Nigeria, primarily in the oil and gas, construction, and telecommunications sectors,
according to the local investment agency (Umejei, 2015). The number of people registered with the investment agency had increased to 308 by 2016, though this figure could be much higher (Sun, 2017). Chen et al.
(2016) surveyed two sources, the Nigerian Investment Promotion Council (NIPC) and the Chinese Ministry of Commerce (MOFCOM), for the number of Chinese companies approved to invest in Nigeria, and discovered 221 and 297, respectively. There was no guarantee that they would commit financially. There were 141 MOFCOM listings and 92 NIPC listings for manufacturing.
Nigeria has also been a major recipient of Chinese loans (the NIPC's Chapter 7 details many Chinese loans to Nigeria and other African countries) (Chapter 7 of NIPC details many the Chinese loans contracted by Nigeria and other African countries). Between 2010 and 2019, Nigeria received the fourth-highest amount of loans from China in Africa, and the sixth-highest amount between 2000 and 2015.
SAIS-CARI (2018) This figure is likely to have increased as a result of China's US$7.5 billion loan in 2017 for the Lagos-Kano and Lagos- Ibadan railways (Adamu, 2017). After South Africa, they were the second-highest recipient of FDI in 2019. Between 2010 and 2019, Nigeria was the second-largest importer of Chinese goods after South Africa, according to Umejei (2019). Over the same time period, exports to China have consistently ranked among the top five (UNCTAD, 2018).
China-Nigeria trade relations have been heavily criticized in the press and in academic writings. Sansui, former governor of the Central Bank of Nigeria, stated in 2013 that "China takes primary goods from us and sells them to us as manufactured goods." This was the essence of colonialism as well.' Others have also been harsh. According to Agubamah (2014), the Nigeria-China relationship is a lose-lose situation, not a win-win situation, as China claims. He continued by stating that Nigeria should not be used as a dumping ground for low-cost Chinese imports.
The Chinese government, on the other hand, sees its investment in Africa as a "win- win" situation that benefits both China and Africa. At the 2018 Forum on China-Africa Cooperation (FOCAC), China's President Xi Jinping argued that the goal of China-Africa relations is to make "lives better for our
people," and that cooperation should benefit both China and Africa (Tiezzi, 2018). The relationship between Chinese investment and economic growth, on the other hand, is a hotly debated topic, and specific areas of engagement, such as natural resource-backed loans, have been heavily criticized (Strange, 2013; Alves, 2013).
According to Alves (2013), while resource-for-infrastructure agreements have increased access to hard infrastructure such as roads, dams, and railways, they have done little to aid Africa's economic diversification and transition from resource dependency to resource-based industrialisation. Nigeria appears to be relying more on Chinese loans for critical infrastructure development, prompting widespread condemnation of the debt burden and the political consequences of the loan's impact. President Mohammadu Buhari's administration has been heavily chastised for its reliance on Chinese loans, which some argue threatens democratic stability. This study examines the economic relations between China and Nigeria, with a focus on the implications for democratic stability during President Mohammadu Buhari's administration from 2015 to 2022.
LITERATURE REVIEW
Infrastructure Investments by China in Nigeria
Successive local, state, and federal governments have prioritized infrastructure and resource development in an effort to improve and expand infrastructural facilities in the country while also boosting socioeconomic activities and operations. Construction of roads, rail lines, and power plants has received special attention, with the Chinese playing an active role. A good example is the conversion of Nigeria's one-track rail from Lagos to Kano via Abuja to standard gauge rail. This rail line will be built in five segments over the course of five years at a cost of more than $9 billion (Chen, 2018). Unfortunately, the work is not yet finished. Other engineering and construction projects in China have recently been completed, while others in the energy sector are still in the works. The Nigeria Communications Commission (NCC) Headquarters building in Abuja is another example of Chinese construction (Meidan, 2006). Over 200,000 Nigerians have been hired to work on
construction projects that are typically overseen by Chinese experts.
China's involvement in Nigeria totals US$5.4 billion in financing commitments. The first phase of the National Rural Telephone Project (NRPT) was agreed upon in 2002, when China's two telecom behemoths ZTE and Huawei started actively pursuing equipment supply and network rollout projects in the country for both fixed and wireless services (Mthembu-Salter, 2009). Nigeria received its first loan from China Exim Bank in 2005 to help fund the construction of power plants in Ogun, Ondo, and Kogi states, respectively, at Papalanto (335MW), Omotosho (335MW), and Geregu (138MW). The Papalanto plant was built by Sepco of China, according to the Bureau of Statistics, with China Exim Bank agreeing to finance US$300 million of the estimated US$400 million construction costs. The agreement was backed up by oil, with CNPC securing a one-year contract with the Nigerian National Petroleum Corporation (NNPC) to buy 30 000 barrels of crude oil per day (Africa Today 2016). To support the country's water supply program, the PRC agreed in March 2005 to construct 598 boreholes in 18 of Nigeria's 36 states, including the capital, Abuja. The goal of the free-aid water project was to provide clean, drinkable water to Nigerians. China Ex-Im Bank financing increased significantly in 2006, with nearly $5 billion in projects approved. A US$2.5 billion contribution was made to a major Lagos- Kano railway upgrade project, and a US$1 billion contribution was made to the Abuja Rail Mass Transit project, which includes the construction of a high-speed rail link connecting Lagos and Abuja, as well as a light railway system connecting Murtala Mohammed International Airport and Nmandi Azikwe International Airport in Lagos and Abuja city centers, respectively. Furthermore, Mustapha Shehuri, the then-Minister of State for Power, stated in 2016 that China Gezhouba Group Corporation, a Chinese construction behemoth, would now complete the stalled Mambilla Power Project at a cost of around US$6 billion (CGGC). Nigeria lags behind other developing countries in infrastructure and has a strong desire to catch up, both in the spirit of south- south cooperation and in China's need to continue expanding its economic frontier in order to improve its people's welfare and gain legitimacy.
As a result, China has been building on a massive scale in Nigeria, such as the recent signing of a $12 billion contract to build a coastal railway in Nigeria stretching 650 kilometers across the country from Calabar to Aba, Port Harcourt, Warri, Benin City, and Lagos. Never in human history has a continental-sized China, which was as impoverished as most African countries just 30 years ago, built Nigerian infrastructure on such a large scale that it could aid the country's development. China is currently lending $500 billion to Nigeria to improve existing railways, which has sparked debate between Transport Minister Rotimi Amechi and the House Committee on Treaties and Bilateral Agreements (August 17, 2020, Channels News).
As part of the first phase of Nigeria's railway modernization program, the Chinese government has committed to funding the construction of the Abuja Rail Mass Transit System as well as the rehabilitation of 1,315 kilometers of the Lagos-Kano line. The total cost of the Lagos-Kano rail project is estimated to be US$8.3 billion, with China contributing US$2.5 billion via a line of credit, a portion of which would also be used to support power projects. However, the Chinese rail projects were halted in October 2008, pending a review of the agreements, following a period of tensions caused by Nigerian allegations that China was failing to deliver on its investment promises. (Note: In the same year, Nigeria suspended the rail contract with China Civil Engineering Corporation (CCECC), claiming that the cost was exorbitant and that the government lacked the funds to modernize the country's century-old rail system. Former Nigerian President Olusegun Obasanjo awarded the contract to the Chinese company in 2006 in exchange for an oil block. China aided the transaction by offering a $2 billion loan.
Justification for China's Investment and Loan Commitment to Nigeria
Contrary to popular belief, China is interested in more than just Nigeria's natural resources. China has at least four national interests in Nigeria: political, economic, security, and ideological. Nigeria's abundant natural resources and underdeveloped market potential present numerous business opportunities for Chinese investors. The increased Chinese economic presence on the
ground makes it difficult to protect brisk Chinese investment and personnel in Nigeria.
The success of the so-called China Model or Beijing consensus, as well as relations with non-Western and democratic Nigeria, has become an increasingly important domestic and foreign policy goal as China pushes for more open international relations:
Economic interests: Chinese officials have repeatedly stated that economic gain has never been China's goal in Africa: Former Chinese Premier Wen Jiabao boasted in 2011 that China had selflessly aided Africa at a time when China was the poorest. We took no oil or minerals from Africa. This appears to imply that Beijing views Africa in terms of political ties rather than economic benefits. According to some Chinese analysts, Africa would have been important for China regardless of economic benefits because China's political agenda has been a consistent theme of Beijing's Africa strategy (Wen, 2016). Despite Nigeria's political importance, China has prioritized economic considerations in its domestic and foreign agendas since the beginning of Beijing's strategy to diversify and consolidate its legitimacy through the provision of economic development to the general population. In November 2006, China hosted the Sino-African summit in Beijing, where at least 48 African heads of state met to discuss economic and diplomatic initiatives that would benefit their respective regions. The abundance of resources in Africa has justified China's initiative (Zhao, 2006).
Another reason for China's increased involvement in the global south is the country's need for foreign markets and resources to fuel its rapid growth. East Asian energy demand has increased by 5% per year. Furthermore, oil consumption in developing Asia is expected to rise from 14.6 million barrels per day in 2000 to 29.8 million barrels per day by 2025 (David, 2018). By 2025, China's consumption is expected to be 10.9 million barrels per day, with net imports of 7.5 million barrels per day.
This will be primarily due to an increase in the number of passenger cars as China's population grows wealthier. China surpassed Japan as the world's second largest oil importer in 2003, and it surpassed the US as the world's second largest energy consumer in 2004. Beijing must pursue an active foreign policy in order to meet rising demand for oil and other minerals. The
Chinese National Petroleum Corporation (CNPC) and the Chinese National Offshore Oil Corporation (CNOOC) serve as the Beijing government's financial arm in securing territory and developing joint ventures with domestic producers enabled by government- secured trade agreements. CNPC outbid Exxon, Texaco, and Amoco in 1997 for the acquisition and development of oil fields in Iran, Venezuela, and Sudan. Currently, Nigeria supplies the majority of China's oil.
Chinese companies have invested billions of dollars in foreign currency and used Chinese engineering and construction resources to develop oil, gas, minerals, and other natural resources in Nigeria and other African countries. China's new African energy investments are unmistakably aimed at supplementing the country's Middle Eastern oil imports. According to the agreement, the loan will be heavily re-invested in infrastructure construction, with Chinese companies receiving 70% of the loan funds and local subcontractors receiving 30%. Petro-China agreed to buy 30,000 barrels of oil per day from the Nigerian National Petroleum Corporation (NNPC) for $800 million in July 2005. In January 2006, China National Offshore Oil Corporation (CNOOC) paid $2.27 billion for a 45 percent stake in a Nigerian offshore oil and gas field and promised to invest an additional $2.25 billion in field development after failing to acquire American-owned Unocal (Kate & Shai, 2006). In 2004, China and Nigeria exchanged high-level party and government officials on multiple occasions. The majority of the discussions focused on economic and energy collaboration.
Former Chinese President Hu Jintao, for example, visited Nigeria, the oil giant, in February 2004 to further secure energy supplies. Wu Bangguo, Chairman of the National People's Congress, visited Nigeria in October and November 2004. The visit focused on joint exploration opportunities in the country for oil, minerals, and renewable resources. When then-Foreign Minister Li Zhao Xings visited Nigeria in January 2006, he was accompanied by the publication of China's African Policy, an official Chinese government paper aimed at promoting economic and political cooperation, as well as joint energy development, without interfering in each other's internal affairs ( BBC news).
The volume of Sino-Nigerian trade has increased over the last five decades. A broader range of products are now traded, demonstrating China and Nigeria's friendly cooperation. Since the 1980s, when it launched its reform and opening-up program, China has placed a high value on friendly cooperation with African countries. The volume of Sino- Nigerian trade has grown at an annual rate of 3.6 percent on average, with some years exceeding 40 percent. The volume of trade in 2000 exceeded $10 billion. This figure grew to
$39.74 billion in 2005, more than 800 times what it was 50 years ago. The most notable feature of Sino-Nigerian trade development is its rapid expansion.
China’s Political Interests: Political interests have been the anchor and constant theme in Beijing's relationship with Africa since the early days of the People's Republic of China.
In the bipolar Cold War international system, Beijing identified newly independent African nations as a critical group with which to unite in its pursuit of allies. Nigeria and China are both geographically and demographically powerful in their respective regions. In an ever- changing global political order, China is more prepared than ever to broaden diplomatic spheres. Nigeria is an African country that cannot be overlooked in the twenty-first century, when China's primary concerns are economic and political rather than military. As a result of their shared historical experiences, China saw natural common ground and felt empathy for Africa: both Africa and China were victims of capitalist and imperialist colonization and faced the same task of national independence and liberation after World War II. By the end of 2009, Africa had received 45.7 percent of China's total foreign aid of 256.29 billion (Omotere, 2019). As a result, when it comes to the political significance of Africa, China's overarching goal has historically been diplomatic recognition and the establishment of official ties that strengthen the communist regime's political legitimacy. Throughout the 1960s, China used both fists to strike (in two directions: toward the United States and the Soviet Union), its assistance to African countries relieved China of the international isolation imposed by the two major powers.
China's emotional attachment to Africa has remained a constant in the relationship since then (Wenping, 2017). Another important
political goal for China in its relationship with Nigeria is the removal of Taiwan's diplomatic presence. Adopting the One China policy and recognizing Beijing as China's sole lawful representative, rather than Taipei, is fundamental to Beijing's regime legitimacy.
Beijing and Taipei have been at odds over diplomatic relations with African countries since the establishment of the People's Republic of China.
Ideological Interests: China's emphasis on ideology stems from the country's hostile external environment, which forced it to seek friendly diplomatic space in order to survive.
Despite China's own economic difficulties, this ideologically motivated policy resulted in massive aid to Nigeria, which was gradually phased out after 1979. Since then, China's relationship with Nigeria has been governed by ideology rather than ideology (communism or socialism). It has instead strengthened ties with the vast majority of African countries that support the One China policy. As previously stated, China's non-discriminatory relationship with the majority of African countries is primarily motivated by economic interests and practical political considerations, such as gaining international support, legitimacy, and support for the Chinese government. However, as the world's largest and possibly most successful authoritarian regime, Beijing's foreign policy must strive to serve domestic political objectives. Given the country's lack of democratic elections, many China analysts argue that the Chinese Communist Party (CCPmost )'s fundamental need is to establish and maintain legitimacy. Domestically, the CCP establishes its legitimacy by establishing the New China and bringing prosperity to the Chinese people through reform and opening up.
As a result, democratic demands have been muffled, while the greater need for stability to foster further economic development has taken precedence. Foreign governments' recognition of the CCP's successful political and economic policies is also seen as a powerful reinforcement of the CCP's domestic legitimacy. In this case, the China Model, also known as the Beijing Consensus, is at work. To demonstrate to some African countries that economic development and political stability can trump the need for a strong democratic system, China employs its own development model, which combines
political authoritarianism, economic nationalism, and capitalism. Many statists and protectionists point to China's economic progress as proof that maintaining the state's control over businesses, trade, and political freedom does not preclude a country from growing economically. According to Beijing, the popularity of the China Model is the best way to validate the Chinese system's viability.
Furthermore, the same model underpins the CCP's domestic legitimacy.
Chinese Loans and the Development of Nigeria
China provided loans to Nigeria to help it complete 11 projects. The USD 3.121 billion Chinese loans, according to Ding Y et al. (2006), are project-related loans. Among the projects are the Nigerian Railway Modernization Project (Idu-Kaduna section), the Abuja Light Rail Project, and the Nigerian Four Airport Terminals Expansion Project for Abuja, Kano, Lagos, and Port Harcourt. The Nigerian Railway Modernization Project (Lagos-Ibadan section) and the Abuja-Keffi-Makurdi Road Rehabilitation and Upgrading Project are two other projects. External borrowings in Nigeria have both positive and negative consequences.
Scholars believe that the advantages of Nigeria- China relations have become clearer, and that African countries have found development partnerships with China to be more concretely beneficial and satisfying than their experiences with Western donor countries. Oloyede (2019) elaborated on this, revealing that African countries are much more comfortable with Chinese lendings because China's approach to its aid and trade relationship with Africa is viewed as offering far more practical and concrete types of support, such as infrastructure development, which is critical for Africa's development but has been neglected by traditional donors. Apart from the fact that China fulfills aid promises faster than Western countries, he revealed that China funds or undertakes projects selected by African countries rather than dictating priorities. However, as previously stated, the bilateral relationship between China and Nigeria is fraught with complexities and complexities. Domestic savings in Nigeria are currently insufficient to ensure development (Ogbeifun, 2017).
As a result, there is no longer any need to borrow externally to bridge the gap between savings and investment, implying that Chinese loans, like other forms of foreign aid, have failed to actualize Nigeria's economic development and lift her large population out of extreme poverty (Ajayi and Oke, 2018; Omoruyi, 2019;
World Bank 2019). Perhaps a more scientific approach to assessing the impact of external borrowings and Chinese loans on Nigeria would be to examine the data, which clearly show that 82.9 million Nigerians, or 40.1 percent of the population, are poor by national standards (Pattillo, 2019). In stark contrast to the foreign aid received over the years, Nigeria's poverty rate continues to rise. Furthermore, economic growth has been muted since 2015, with annual growth averaging 1.9 percent in 2018 and remaining stable at 2 percent in the first half of 2019, with growth insufficient to lift the bottom half of the population out of poverty (Aluko and Arowolo, 2019). This pitiful state undermines the projection that borrowings will have a multiplier effect, positively jump-starting and accelerating improved productivity through GDP, a larger export market, a stronger currency, and overall economic reliance (Mbanga, and Sikod, 2019). Borrowings, as a result, should aid in salvaging the situation and reviving the economy. According to Senibi (2016), this is not the case in Nigeria, and the fact remains that the current administration in Nigeria borrowed to offset accumulated
salaries and pensions of workers in the states (Urama, 2018). To put it another way, Nigeria borrowed for consumption but has yet to match those borrowings with meaningful investments in productive sectors to achieve economic development.
As a result, the country's public debt is unsustainable, and the government's external reserves are depleted in order to fund the ongoing deficit budget (Ogunlana, 2019).
Indeed, managing Nigeria's external debt has been a major macroeconomic problem, particularly since the early 1980s, with a variety of factors, including deteriorating commodity prices and the Dutch Disease, ineffective economic policies, poor debt management, unfavorable borrowing terms, and currency depreciation in which debt is expressed, accounting for Nigeria's inability to manage her debts and accelerate economic growth and development (Fosu, 2017). Some Sub-Saharan African countries, according to Agbemavor (2020), have continued to face debt service problems as a result of external shocks such as worsening trade terms, civil strife, a lack of sustained adjustment and implementation of structural reforms, a lack of proper debt management policies in debtor countries, improper management of currency composition of external debt, and ill lending policies of many creditors (Suma, 2017;
Adebowale, 2020).
Table 1: Shows the Status of Loans obtained from China EXIM as of March 31, 2020, in Millions of Dollars.
Source: Debt Management Office (2020) SN Project Description Loan
amount Agreement
Date Interest
Outstanding Rate (p.a)
Grace
Period Maturity
Date Tenor Amount Percentage Principal Interest Amount Interest Outstanding 1 Nigerian National
Public Security Communication System project
399.50 20-Dec-10 2.50% 7 years
21- Sep30 20
years 399.50 100.00% 76.83 84.92 322.67
2 Nigerian Railway Modernization Project (IduKaduna section)
500.00 20-Dec-10 2.50% 7years
21- Sep30 20
years 500.00 100.00% 96.15 74.52 403.8
3 Abuja Light Rail Project 500.00 7-Nov-12 2.50% 7years
21- Sep32 20
years 500.00 100.00% 19.23 60.63 480.77
4 Nigerian ICT
Infrastructure Backbone Project
100.00 5-Jan-13 2.50% 7years
21- Sep32 20
years 100.00 100.00% 0.00 9.38 100.00
5 Nigerian Four Airport Terminal Expansion Project (Abuja, Kano, Lagos & Port Harcourt)
500.00 10-July-13 2.50% 7years
21- Sep34 20years 455.28 91.06% 0.00 40.58 455.28
6 Nigerian Zungeru Hydroelectric Power Project
984.32 28-Sep-13 2.50% 7years
21- Sep33 20years 518.24 52.65% 0.00 19.28 518.24
7 Nigerian 40 Parbioled Rice Processing Plants Project (Fed. Min of Agric & Rural Dev.)
325.67 26-Apr-16 2.50% 7years
21- Mar36 20years 0.00 0.00% 0.00 0.00 0.00
8 Nigerian Railway Modernization Project (Lagos-Ibadan section
1,267.32 18-Aug-17 2.50% 7years
21- Sep37 20years 759.84 59.96% 0.00 19.11 759.84
9 Nigeria Rehabilitation and Upgrading of Abuja-Keffi-Markurdi Road Project
460.82 18-Aug-17 2.50% 7years
21- Sep37 20years 80.64 17.50% 0.00 1.84 80.64
10 Nigeria Supply of Rolling Stocks and Depot Equipment for Abuja Light Rail Project
157.00 29-May 18 2.50% 7years
21- Mar38 20years 0.00 0.00% 0.00 0.00 0.00
11 Nigeria Greater Abuja
Water Supply Project 381.09 29-May 18 2.50% 7years
21- Mar38 20years 0.00 0.00% 0.00 0.00 0.00
Total 3,313.50 192.21 269.68 3,121.29
Implications of Chinese Loans for Nigeria's Democratic Stability
Nigeria's Chinese borrowings have recently come under fire from a number of sources, including the Nigerian House of Representatives Committee on Treaties, Protocols, and Agreements, chaired by Nicholas Ossai, which claimed to have discovered a clause in a Chinese loan contract signed in 2018 for $400 million from the China Exim Bank for the Nigeria National Information and Communication Technology (ICT) Infrastructure Backbone Phase II Project, which allegedly puts the country in jeopardy. The Committee cited a "lethal clause" in Nigeria's commercial loan agreement with the Export- Import Bank of China, which reads as follows:
Except for military and diplomatic assets, the borrower (Nigeria) irrevocably waives any sovereign or other immunity for itself or its property in any arbitration proceeding or enforcement of any arbitral award under Law of the Sea Convention Article 8. (5). He expressed his reservations, stating that President Muhammadu Buhari's administration believed that borrowing was the only way to reduce Nigeria's infrastructure deficit in the midst of so much poverty in the country, lamenting that, while citizens' interests were prioritized whenever governments signed any loan agreement in rational climes, the Nigerian government signed away some critical things in loan agreements signed with China. According to Ogulana (2020), the Chinese determined the cost of the projects, provided loans tied to the projects, and required that the projects be completed solely by Chinese firms, with no say from the government other than loan repayment. "That's how the Chinese calculated the $500 million price tag for the Lagos-Ibadan railway," he says. According to the agreement reached between Nigeria and China, it is being carried out by a Chinese company. As a result, they needed to bring in a lot of equipment and people for the project. China is clearly using such loans to boost its goods and services exports at the expense of Nigeria. They know what they're doing when they charge 2.5 percent interest. The truth is that by opening up the contract and hiring the best contractors, Nigeria will be able to complete these projects at a lower cost while maintaining quality. They calculate the costs of projects financed with
Chinese loans, which are typically exorbitant.
This is a violation of Nigerian procurement law.
Human Rights Writers Association of Nigeria 2020 has a debt-free revenue of 96 percent. This means that 96 kobos are used to repay loans for every naira of revenue earned by the country. Similarly, Nigeria's Chinese borrowings have a high agreed debt-revenue ratio, with N 943.12 billion spent on debt servicing in Q1 2020, with remaining revenue estimated at N 950.56 billion (Ojeme, 2020). It claimed that with debt servicing accounting for a quarter of Nigeria's proposed N10.3 trillion (2020) budget and capital spending accounting for N 2.5 trillion, the country's debt servicing capacity was already severely strained, with interest payments exceeding capital spending since 2014. Indeed, the group agrees that the majority of funds distributed are returned to China in the form of supplies and construction contracts, with all equipment imported from China.
The Chinese Foreign Ministry, on the other hand, denied that China had any clause in its loan contracts that ceded Nigeria's sovereignty to China, noting that China follows a five-no approach in her relations with Africa, which entails no interference in African countries' pursuit of development paths that fit their national circumstances; no interference in African countries' internal affairs; no imposition of our will on African countries; and no attachment of political power to African countries. According to the statement, China is committed to increasing investment and financial cooperation with African countries based on their needs in order to help them improve infrastructure and accelerate socioeconomic development, and that by funding infrastructure and other areas that lag due to a lack of funds, China has helped the relevant countries break bottlenecks, improve their capacity for independent development, and realize social and economic sustainability (Deron, 2020). In support of China's position, he clarified the meaning of the contentious sovereign clause, noting that the Nigerian side agreed to waive immunity on sovereign or other grounds but not sovereignty. He maintained that states have immunity from jurisdiction under international public law, which means they cannot be sued in the courts of another sovereign state without their consent, as well as immunity from execution,
which protects state assets from seizure by law enforcement agencies of another state, but he clarified that a sovereign state with immunity, like a private individual or any other legal subject, can choose to waive it. He also contended that the Nigerian state's agreement to appear before the chosen arbitration tribunal in the event of a dispute appears to have been a condition for the Chinese party entering into the loan agreement, and that the Nigerian state's position does not appear to be unreasonable unless there are other clauses in the agreement that have not been publicly commented on and contradict the interpretation. According to him, the sovereign immunity privilege was waived solely to carry out the loan agreement with Exim Bank of China in 2018, while the state of Nigeria retains its privilege in all other circumstances, and thus signing such clause has no effect on Nigeria's inherent sovereignty.
Theoretical Framework
In the study, the Economic Nationalism theory is used, which makes the same basic argument about the importance of power in international relations as the Realist theory.
Supporters included Alexander Hamilton (1755-1804), Friedrich List, and others (1789- 1846). Economic nationalism strengthens the role of the state in the global system (O'Brien &
Williams, 2004). Economic nationalists argue that the role of the state has not been diminished by globalization because states drive and shape the globalization process, and national economies are the most important actors in international economic processes.
National power is a synthesis of political and economic power: as economic power increases, so does political power, and vice versa. As a result, Economic Nationalists recognize the inextricably linked relationship between wealth and power. Economic nationalists rely on national prosperity to expand their power (Chin, 2015).
The role of the state in economic development contributes to the formation of a national identity because economic development shapes and enforces national ideas and sentiments. As a result, economic nationalism depends on the relationship between the economy and the nation. Economic nationalism has often been associated with mercantilism and protectionism. Economic
nationalism, on the other hand, differs from those approaches slightly. Economic nationalists advocate for national unity, autonomy, and the expansion of national power, whereas mercantilists advocate for protectionism. Unlike mercantilists, economic nationalists support free trade if it strengthens national power. As a result, Economic Nationalists argued for protectionism and government intervention in the economy only under specific conditions, such as "if a nation capable of industrialization had not yet done so." Economic nationalists argue that liberal economic policies in the international economy are not necessary for liberal economic policies in the domestic economy, and that effective international participation necessitates government intervention. Economic nationalists advocate for government policies that strengthen national unity.
The theory's flaw is that it ignores other factors and government interests that may require government intervention, and it places far too much emphasis on wealth and power (Agubamah, 2014). Economic nationalism lends itself well to examining China's infrastructure diplomacy in Nigeria; China has a long history of nationalism, and its foreign policy orientation remains distinctly nationalist. Since the nineteenth-century Opium Wars, which saw disputes over British trade in China, Western hostility toward China, as well as Western control over certain areas of China, have fueled Chinese nationalism. In this historical context, Chinese rulers promoted nationalism as a means of countering external hostility and asserting independence (Zhu, 2001). For the vast majority of the twentieth century, nationalism dominated Chinese foreign policy. The Chinese government has actively promoted state nationalism since 1949. (How is this different from ethnic nationalism, which seeks to establish a Chinese nation?) Nationalism continues to dominate China's foreign policy. Foreign policy shifts in China are typically context-specific adaptations that serve the fundamental goal of Chinese nationalism: the pursuit and preservation of China's national independence. Chinese nationalism prioritizes economic development, national unity and independence, and international prestige. Because it encompasses all other national goals, economic development
is regarded as the most important of the three priorities (Chen, 2005).
CONCLUSION AND RECOMMENDATIONS China's economic relations with Nigeria are motivated by the fact that Nigeria lags behind other developing countries, such as Brazil, India, and South Africa, in infrastructure development and has a strong desire to catch up in the spirit of south-south cooperation.
Furthermore, China sees Nigeria as capable of meeting its needs in order to achieve its economic and political interests in order to improve its people's welfare and gain legitimacy. As a result, China has been lending heavily to Nigeria in order to improve its infrastructure, such as the recent signing of a
$12 billion contract for the construction of a coastal railway in Nigeria spanning 650 kilometers from Calabar to Aba, Port Harcourt, Warri, Benin City, and Lagos. Never before in human history have we witnessed the spectacle of a continental-sized China, initially propelled by its massive demand for energy resources but since expanding its involvement beyond oil.
Chinese firms now dominate other sectors of the Nigerian economy, including agriculture, construction, manufacturing, and information and communication technology. As a result, China's Foreign Direct Investment in Nigeria has increased. However, certain contentious features have distinguished Chinese loans in particular. The paper discovered that the entire gamut of Sino-Nigeria economic relations is bedeviled by imbalance to the detriment of Nigeria, a situation that has further plunged Nigeria into deeper debt crisis, leaving it with an asphyxiated economy, by deploying the qualitative mechanism of data collection and analysis. Notably, projects slated for execution through external borrowing do not undergo open competitive bidding, and detailed information on projects slated for execution through Chinese loans is scarce at the conception stage for necessary inputs from Nigerian stakeholders. This flawed process undermines the loans' credibility and further impoverishes the Nigerian economy, prompting many to argue that if the situation is not addressed, debt entrapment will occur, leading to democratic instability in Nigeria.
The following policy recommendations are made based on the findings:
1. Nigerian policymakers will leverage Chinese investment in infrastructure development to promote the country's long-term development. To begin with, Nigeria must seize a once-in-a-lifetime opportunity by collaborating with China on infrastructure development and industrial collaboration to accelerate industrialization and agricultural modernization. The Nigerian government must recognize the significance of establishing policies that require China to ensure that goods imported into Nigeria meet the highest standards available anywhere in the world.
2. Second, political stability and continuity lay the groundwork for and ensure the success of Sino-Nigerian infrastructure collaboration. Nigeria must implement far- sighted and appealing investment policies, as well as provide a macroeconomic environment that is politically stable, business-friendly, and open to all other nations, in order to attract much-needed investment, including from China. China should be asked to manage follow-up operations for a set period of time whenever possible. Many failed cases can be traced back to a hurried transfer of authority to the local side following completion.
3. Fourth, repayment plans for Chinese loans used to finance infrastructure projects must be strategically developed and made public.
This is to ensure that governments accept accountability and responsibility.
4. Nigeria should also improve the effectiveness of its local technician training and attempt to retain them. This will determine the project's success and lay the groundwork for Nigeria's future industrialization and all loans from China should be properly channeled to projects that improve the welfare of citizens; efforts should be made to ensure accountability in the use of all loans received so that future generations are not harmed.
REFERENCES
Agbemavor, K. (2015). “The effect of external debt on economic growth in Sub-Saharan Africa”.
A regional econometric approach of ECOWAS countries” Development Review, 90(3).
Agubamah, E. (2019). “Bilateral relations:
Periscoping Nigeria and China relations”, European Scientific Journal, 2(9).
Ajayi, A. and Oke, R. (2019). “Effect of External Debt on Economic Growth and Development of Nigeria”, International Journal of Business and Social Science 12(3)
Aluko, F. and Arowolo, D. (2020). “Foreign aid, the third world’s debt crisis and the implication for economic development: The Nigerian experience”, African Journal of Political Science and International Relations 9(23) Bekele, A. (2020). “China’s role in development of
Africa”, the case of Ethiopia in International Journal of New Economics and Social Sciences.
7(2)
Debt Management Office. (2020). “Facts about Chinese loans to Nigeria”. DMO Abuja
Debt Management Office. (2020). “Nigeria’s Total Public Debt Portfolio”. DMO Abuja
Deron, L. (2020) “Did Nigeria really cede its sovereignty to China in a loan agreement? A legal review of the public debate sparked by a Nigeria-China commercial loan agreement”, Diplomatic Consular Office, Abuja
Ezirim, G. (2017). “Reflections on the China-in-Africa debate: mercantilism, partnership or resurgence of hegemony?” Journal of International Politics and Development Studies 4(12)
Fosu, A. (2017). “The external debt servicing constraint and public expenditure composition”, Evidence from African economies. OECD Research, April 2(4) Guixuan, L. (2015). “Perspectives on China-Africa
Trade and Economic Cooperation”, Embassy of the People’s Republic China in the Republic of South Africa. Johanesbourge.
Hassan, O. (2019). “Implications of external debt on the Nigerian economy: Analysis of the dual gap theory”, Journal of International Politics and Development Studies 8(2)
International Monetary Fund. (2000). “The logic of debt relief for the poorest countries”, Issues briefs for 2000, 2001, 2002, and 2003, IMF, Washignton DC
Kazeem, A. S. (2020). “Fiscal dominance and inflation: Evidence from Nigerian and South African’s experiences”, Journal of International Politics and Development Studies 5(9)
Madu, A. (2015). “The political economy of external debt management in Nigeria: Strategies, issues and challenges”, Australian Journal of Basic and Applied Sciences 23(91)
Mbanga, G. and Sikod, F. (2019). “The impact of debt and debt-service payments on investment in Cameroon. A final report presented at AERC
Biannual Research Workshop at the Grand Regency Hotel, Nairobi.
Nwachukwu, L. (2015). “Nigeria-China bilateral relations: Past, present and future.
Contemporary Readings on Nigeria’s External Relations: Issues, Perspectives and Challenges”, WillyRose and Appleseed.
Ogbeifun M (2007). “The politics of external debt relief: Nigeria’s unique experience in African Journal of Stability and Development, 12(45) Ogulana, D. (2020). “China loans: Demand for
cancellation, expunge of anti-sovereignty clauses – lawyer urges Nigerians”, This Day Newpaper, April 12
Ogunlana, A. (2015). “Nigeria’s and the burden of external debt: The need for debt relief”, Central Bank of Nigeria. Abuja
Ojeme, V. (2020). “No clause in loan contracts ceding Nigeria’s sovereignty to China–Chinese foreign ministry”. Chinese Consulate, Abuja.
Ojukwu, C. (2015). Terrorism, foreign policy and human rights concerns in Nigeria”, WillyRose and Appleseed.
Omoruyi, S. (2015). “Debt burden: Sustainability indicators”, Regional Course on Debt Recording and statistical analysis, Washington DC.
Onuoha, J. (2018). “Beyond diplomacy: Contemporary issues in international relations”, Enugu.
Out, A. (2018). Evolution and implications of underdevelopment in Africa: Nigeria foreign policy response”, Contemporary Readings on Nigeria’s External Relations: Issues, Perspectives and Challenges. Abakaliki: Willy Rose and Appleseed Publishing Company.
Pattillo, C.. (2020). External debt and growth in Finance and Development”. “The return of Non-DAC Donors to Africa: New prospects for African Development?” Policy Review.
Senibi, V. (2016). “Public debt and external reserve:
The Nigerian experience”, Economics Research International 6(7)
Suma, D. (2017). “The external debt crisis and its impact on economic growth and investment in Sub-Saharan Africa: A regional econometric approach of ECOWAS countries”. Abidjan
Urama, N. (2018). Nigeria’s debt burden:
Implications for human development”, African Heritage Institution.
Utomi, P. (2018). “China and Nigeria”: How tidy is Nigeria-China relations? Journal of International Politics and Development Studies 10(2)
World Bank. (2019). “Investing in Human Capital for Nigeria’s Future”, Nigeria Biannual Economic Update. Washington. DC: World Bank Group.
World Bank. (2019). “The Changing Nature of Work.
World Development Report. International
bank for reconstruction and development”.
Washington DC.
Xianfa, L. (2022). “Towards enhancing China-Nigeria relations”. Nigeria: Accessed 31st March, 2022
www.punchng.com/opinion/towardsenhanc ing nigeria-china-relations.
Xiaofeng, Z. (2019). “Sino-African Economic Cooperation: Achievements, Problems and Suggestions”, In Hongwu, L and Y. Jieman (eds.), Fifty years of Sino-African Cooperation:
Background, Progress and Significance.
Yunnan University Press.
