Chinese Silk Road; Debt Peonage for Nigeria?
China is out to conquer the world, and many countries have unwittingly fallen victim to its geopolitical strategic agenda. Yet there is an emergent corollary; worries about rising global indebtedness to China. As a superpower, China continues to assert itself on the global stage, underpinning a campaign that commenced well over a decade ago, with its Belt and Road Initiative (BRI) also known as the “Silk Road”.
Undergirding the Belt and Road Initiative, is a trillion-dollar loan subvention that seeks to connect countries across continents on a trade trajectory, with China at its core. The ambitious plan involves the building of railway and road infrastructure to connect China with Central and West Asia, the Middle East and Europe (the “Belt”)and creating a 6,000km sea-route connecting China to South East Asia, Oceania and North Africa (the “Road”).
Beneficiaries of China’s goodwill are many. So too are the countries, mostly African nations, already defaulting on their Chinese loans. The trend is deeply alarming. In 2017, with more than $1 billion in debt to China, Sri Lanka handed over one of its ports to companies owned by the Chinese government. Now Djibouti, home to the U.S. military’s main base in Africa, seems set to cede control of another key port to a Beijing-linked company.
China-Nigeria relations is paradoxical and defined by two contradicting aphorism. While its commonsensical that “You don’t look a gift horse in the mouth,” it is equally pragmatic to “Beware of strangers bearing Greek gifts.” Nigeria-Sino political and economic relations go back to 1971, when the two countries established formal diplomatic relations and exchanged envoys.
The tides of events were drastically altered between 2004 and 2006, following the visit of the then-Chinese President Hu Jintao to Nigeria. President Hu Jintao addressed a joint session of the National Assembly and signed a Memorandum of Understanding (MOU) establishing a strategic partnership with Nigeria. That MOU singularly marked the new phase of Nigeria-Sino relations that consequently led to China becoming Nigeria’s biggest economic partner.
Certain economic complementarities are directly responsible for the growing relationship between China and Nigeria. First, is that Nigeria is developmentally challenged given its infrastructure deficits. Secondly, China has developed one of the world’s largest and most competitive construction industries with particular expertise in the civil works, considered critical for infrastructure development. The latter when combined with China’sability to provide presumably soft loans made its expansive incursion into Nigeria relatively easy.
With over $6 billion Chinese investment between 2012and 2017, Nigeria ranks secondbehind Egypt, as Africa’slargest recipient of Chinese investment. Naturally, Nigeria may well join the swelling club of Chinese debtors, of which Sri-Lanka, Pakistan, Djibouti, Maldives, and Laos are the most heavily indebted.
China’s foray and the attendant challenges were not instant. In his 2013 op-ed in the Financial Times, Sanusi Lamido Sanusi, the then Governor of the Central Bank of Nigeria, opined that “Africa must get real about Chinese ties,” while decrying the way that China operates across the continent. According to Sanusi, “China takes our primary goods and sells us manufactured ones. This was also the essence of colonialism. The British went to Africa and India to secure raw materials and markets. Africa is now willingly opening itself up to a new form of imperialism…China is no longer a fellow under-developed economy – it is the world’s second-biggest, capable of the same forms of exploitation as the West. It is a significant contributor to Africa’s deindustrialisation and underdevelopment.”
The concerns notwithstanding, Nigeria and Chinaconcluded a currency swap agreementrecently, in which 16bnRenminbi(RMB) is to provide adequate local currency liquidity to Nigerian and Chinese businessmen. Since 2014, Chinese currency, theYuan, has assumed greater prominence in world trade with some countries considering it a global reserves currency.With the deal, Nigeria became the fourth country in Africa (after Ghana, South Africa and Zimbabwe) to sign on to Yuan for its trading and financial market transactions.
China-Nigeria investment relations just like any bilateral relationship, has some advantages and disadvantages. Thus, whether the Chinese Silk Road represents Eureka or adebt peonage for Nigeria can only be determined in the near future. The pointer, for now, is on the balance and the pendulum could swing either way. An optimal outcome from Nigeria-China relationship will depend on the policies and institutions that are put in place by Nigerian authorities to maximize the complementary effects and to minimize the competing and deleterious effects.
Meanwhile, China is virtually present everywhere in Nigeria,even as information about its engagement and activities remain opaque and fragmented. It would amount to folly not to monitor China activities rigorously. There is therefore, need to establish a coordinating body on China. This body, preferably a technical arm of an existing body, should be empowered to scrutinize and evaluate agreements, memoranda and any other articles of association between Nigeria and China in keeping with provisions of Presidential Executive Order No.5.
The ultimate objective of the proposed body is to spell out the cost as well as the benefits of Chinese-proposed projects and/or programmes. This is similar to what a legal department would do to an agreement before initialising/signing. The proposed technical committee in its assignment, must have taken into consideration domestically available resources including skills and ensure that as much as possible, the local content of the agreement is high enough not only for the purpose of generating employment for Nigerians, but also to develop their technological capability.
The optics and narratives on Nigeria-Sino relations remains mixed. Nigeria’s economic dalliance with China has also elicited concerns outside Nigeria, including warnings from the U.S. government that Nigeria and other African countries should be wary of Chinese deals. While U.S. rebuke may not be entirely altruist, it retains some validity. Accordingly prevailing concerns that China’s incursion into Nigeria might have negative consequences in the long-term cannot be over exaggerated.
Chendo is a Research Associate at Selonnes Consult; Obaze is MD/CEO Selonnes Consult in Awka.