China has increased its investment in Nigeria. In addition to recent oil deals, China has just announced it will loan the African nation $900 million dollars to fund rail and communication projects in Nigeria. But is all this investment from China a plus for Africa´s most populous nation?
The rail and communication in Nigeria do need improving, says Africa expert Dr. Olajide Oladipo of York College/CUNY. “In many developing countries such as Nigeria, transportation infrastructures (roads, rail, airports and seaports) are the arteries for the free flow of people, goods and information. The neglect of the Nigerian rail system for decades has contributed to the nation’s dependence on food importation, as agricultural produce from one part of the country cannot be transported cheaply to other parts. In fact, the lack of an efficient rail transport system has discouraged many farmers (and producers of cocoa, groundnuts, coffee etc) whose harvests perished because they could not access the market. Also, Nigeria continues to record socio-economic losses from the failure to expand the railway network to all regions,” says Dr. Oladipo. “Therefore, the attempt to revamp the rail system in Nigeria through a loan deal of $900 million with China is a step in the right direction. It will enhance the transportation of goods (most especially cocoa, groundnuts, coffee etc.) and services in a timely fashion. The development of the rail, an important component of transportation system in Nigeria, will impact the development and welfare of the people. In a nutshell, rail transportation will provide economic and social opportunities and benefits that will result in positive multiplier effects such as better accessibility to markets, employment and additional investments in other sectors of the Nigerian economy.”
The loan, says Dr. Oladipo, is only a plus for Nigeria, with China, one of the few outside countries willing to invest in Africa. “China’s trade influence is growing not only in Nigeria but in the entire African continent. Recently, an African products exhibition centre was established in China to open the market for the continent’s exports. Under the arrangement, goods, particularly agricultural products, enjoy zero tariffs to encourage African exports. Specifically, the focal market for Nigeria’s cassava initiative is China. In fact, under China’s current trade policy for Africa, Nigerian cassava would receive concessions,” explains Oladipo. “For decades, many countries relied on the United States for economic and political directions. Recently, there is a growing consensus in developing countries that China is providing economic alternatives. China’s growing economic influence is providing Nigeria, and other developing countries, with a choice. Since the exodus of many American companies from African to Asian countries, the continent is left with no other option than to embrace the alternative China is providing.”
Of the $900 million, about $500 million would be used for a railway between Nigeria’s capital Abuja and the northern city of Kaduna, according to the government of Nigeria. The remaining money will go to a national public security communications project. The Export-Import Bank of China will provide the loan. CCECC and ZTE will be the Chinese contractors for the rail and communications projects, which are expected to be completed in three years.
Using Chinese labor instead of local labor has caused a stir. “Currently, there is an increasing concern about China’s economic role in Africa especially from human rights groups, international observers and many African entrepreneurs. Specifically, scholars are concerned about how China operates in Nigeria. For example, international observers pointed out the way China does business, particularly its companies’ willingness to pay bribes as documented by Transparency International,” Oladipo says. “Many Chinese companies are currently being accused of underbidding local firms and not hiring Nigerians. Chinese infrastructure deals often stipulate that up to 70 percent of the labor must be Chinese. Also, China’s policy of not attaching conditions to aid money continues to undermine the government’s effort in Nigeria to improve governance and international efforts at macroeconomic reform by the World Bank and the International Monetary Fund.”
But China influence in the entire continent is growing, and is seemingly unstoppable despite concern from Western nations. “According to the World Bank (2010) report, eighty-five percent of Africa’s exports to China come from five oil rich countries (Angola, Guinea, Nigeria, the Republic of Congo and Sudan). However, the Chinese government claims that China’s economic interest in Africa extends beyond oil. Also, many Chinese companies see Africa, and Nigeria in particular, as both an excellent market for their low-cost consumer goods, and a burgeoning economic opportunity as African countries privatize their industries and open their economies to foreign investments,” says Oladipo. “The need to secure natural resources, especially oil, metals or timber is the driving component of Chinese policy towards Africa. China is gradually adapting its foreign policy to its domestic development strategies by encouraging state-controlled companies to seek exploration and supply contracts with countries that are hugely endowed with natural resources such as oil, gas and metals.”
As Africa continues to develop, China, given its current interest, will continue to play a major part.