A PARTNERSHIP SET IN STONE

Nigeria 2015 | DIPLOMACY | FOCUS: NIGERIA AND CHINA

Signaling China's increasing presence on the African continent, Nigeria and China are eyeing possibilities to further intensify economic and diplomatic ties.

The promise of more investment and an influx of technical expertise into Nigeria that Chinese Premier Li Keqiang made during the World Economic Forum on Africa in Abuja in May 2014 has quickly been translated into concrete action. In October 2014, the Nigerian government signed a $12 billion contract with the stated-owned China Railway Construction Corporation (CRCC) to build a railway from the financial capital of Lagos in the west to Calabar in the east of Nigeria.

The railway, which will be 1,402 kilometers long and use conventional trains with a top speed of 120 km/h, has been hailed as China's largest overseas contract to date. According to estimates by CRCC Chairman Meng Fengchao, the project will generate equipment exports from China valued at $4 billion, including trains and machinery. Up to 200,000 local jobs will also be created during the construction phase of the project, after which a further 30,000 jobs will be added once the railway is fully operational.

This new Lagos-Calabar Rail Project is the latest on the list of Nigerian railway contracts being awarded to Chinese companies. It comes at a time when CRCC has officially rounded off the track laying work for Nigeria's first standard gauge railway modernization project linking Abuja with Kaduna. Two years earlier, the China Civil Engineering Construction Company (CCECC) completed the rehabilitation of the main Western Line between Lagos and Kano under another contract worth $8.3 billion.

China's involvement in these infrastructure projects in Nigeria signals the increased presence of the Asian giant on the African continent in recent decades in a search for resources and new markets for its manufactured products. This increased presence is aptly reflected in the volume of bilateral trade between China and Nigeria, which grew from $2 billion in 2002 to $13 billion in 2013, and represents over 30% of China's trade with the whole of West Africa.

Moreover, President Jonathan has voiced his administration's interest in further strengthening investment and economic ties with China to match the current realities on the ground. The President has remarked that Nigeria-China trade “will continue to grow, indicating the importance of Nigeria for China in the regional market." This is further exemplified by the fact that over 200 Chinese companies are currently operating in Nigeria, leading the President to claim that “Nigeria is currently the preferred destination for Chinese companies in Africa." The potential for investment in Africa's largest economy remains huge, and Chinese companies are expected to continue playing a key role in infrastructure development. Playing into this, the two countries have entered into a low-interest loan agreement of $1.1 billion to fund infrastructure development in Nigeria. In return for the loan, Nigeria has agreed to increase its daily oil supply to China from 20,000 barrels to 200,000 barrels per day by 2015.

On a broader scale, Nigeria and China have enjoyed close diplomatic ties, and China is considered to be one of Nigeria's closest allies today. Going beyond bilateral trade, the nations have embarked on strategic cooperation in military and defense matters.

However, not all is well in the seemingly picture-perfect marriage between Nigeria and China. One area of serious contention between the two countries is the massive inflow of relatively cheap Chinese products into the Nigerian domestic market. This has proven disastrous for certain Nigerian industries, such as the textiles industry that has been unable to compete, and effectively ceased to exist as a result.

It remains to be seen if Nigeria will be able to design appropriate policies to address this issue, while at the same time not distancing itself from its Asian partner, which has always been upfront about its somewhat egotistical goals in Nigeria. Antagonizing the Chinese would be unwise at this point in time, as current cooperation levels with China could put Nigeria more firmly on track to becoming one of the world's biggest economies by 2020. And this in turn could potentially transform the African country from being a dependent partner into a rival for China itself.