Policy analysts contend that China’s “Go out” strategy and principles of “non-interference” and “mutual benefit” are rhetoric. They argue that African countries like Nigeria are not using their regional importance as China’s global relevance rises.
In 2012, Chinese investment in Nigeria was $15.6 billion (the highest in sub-Saharan Africa), according to The Heritage Foundation, a Washington-based think-thank whose China Global Investment Tracker is the only public dataset of Chinese outward investment. These investments, most of them contracts, were in the technology, transport, real estate and energy sectors. 53 percent were energy-related investments and contracts.
Those who argue for a purposeful engagement with China can point to the $21 billion that Nigerians living abroad remitted back home in the same year.
In other words, Nigeria and other African governments need to look beyond the so-called “south-south solidarity”. They have to exploit their relationship with China, and others, by aiming at improving economic diversification and competitiveness. That, contend analysts, is the way to achieve a win-win relationship.
Analysts note that China’s private and state-backed financial institutions can offer competitive rates because the country has trillions of dollars in foreign reserves and low interest rates the world over. And, to buttress the complex nature of Sino-African relations, they point out that Chinese investments are for profit. Chinese are profitably employing their competitive advantage in price, risk appetite and access to credit.
According to the Debt Management Office, Nigeria owes China $678.9 million. Benign loans, to finance much-needed infrastructure, are necessary but insufficient. Focusing on loans alone is to miss various opportunities that Chinese investments in construction, oil and gas, mines, and consumer products offer.
Nigeria’s attraction to China’s compelling economic story, its ability to fund and construct large-scale infrastructure projects, on time and below budget, has benefitted companies like CCECC, Huawei, ZTE, and Techno. The supply of cheap Chinese imports is driven by demand by consumers; these products and services suit the pockets of Nigeria’s subsistence consumer class. For the fake products in the market, experts say, blame Nigerian entrepreneurs that source these goods directly from Chinese manufacturers.
Entities like China-Africa Development Fund (CADFund) have a commercial, long-term approach to investments. Though backed by government, CADFund is China’s largest private equity fund with an African focus. China Merchants and the CADFund paid $154 million for 47.5 percent of Tin-Can Container Terminal, Nigeria’s second largest container terminal.
CADFund is one of many foreign and local investors flying over Nigeria to invest in Ghana’s aviation sector. CADFund and Social Security and National Insurance Trust (SSNIT) – Ghana’s pension fund – invested in Africa World Airline, a private airline that will service the West African region from its hub in Ghana.
In addition to ports and airlines, local private businesses and government need to focus on the strategy – priority sectors, favourable terms that develop skills and transfer technology – and the benefits of foreign investment, from China and elsewhere. These will help diversify the economy, create jobs, and reduce poverty. Economists say that as Chinese manufacturing moves up the value chain, export processing zones (EPZs) will be ideal for low-cost production.