WITH an approximated 170 million population and growing at over two per cent per annum, Nigeria ranks the seventh largest country in the world. According to United Nations (UN) statistics, Nigeria’s population will hit 230 million within the next 20 years. Representing over 65 per cent of the effective West African market, the country remains the most competitive destination for the establishment of medium and large manufacturing industries.
Like the early morning bird, China has since positioned itself to take advantage of this expansive market by unleashing its horde of investors and businessmen on the manufacturing sector. From textile to garment; household appliances, automobile; consumables and iron and steel as well as ICT products, China has taken over, churning out tons of products for various segments of the market.
More Chinese enterprises are expanding their investments in the manufacturing sector ostensibly in the hope of transferring technologies and training personnel to increase local job opportunities. For instance, Chinese-owned Western Metal Products Company Limited (WEMPCO), a multi-billion naira integrated steel mill, situated at Magboro, on Lagos-Ibadan Expressway, Ogun State, is the first of its kind in Africa. The sprawling steel-manufacturing plant boasts of a production capacity of 700,000 metric tonnes and a production machinery of five-stand Tandem Mill.
The factory, according to its Group Managing Director, Mr. Lewis Tung, will produce cold roll steel sheet of up to 0.15mm in thickness and coils of the same dimension and above. Other facilities in the plant include: a 52-megawatt generator for power supply; a water treatment and recycling plant; an acid generating plant; an air purifier and an annealing line.
The economic benefits of the investment are huge. Besides boosting economic activities of the immediate host communities, local, state and the federal governments, it will spur increase in downstream economic activities and create jobs for artisans such as technicians, drivers, auto technicians and fabricators. Mr. Tung added that it will also enhance training and technology transfer. More importantly, the investment will fill the gap left by the moribund Ajaokuta Steel Company in Kogi State.
Another area witnessing massive investment from China is the agriculture sector. A leading Chinese company, New Hope Liuhe Company Ltd., has indicated investment interest in agribusiness. At a meeting with the Executive Secretary, Nigerian Investment Promotion Commission (NIPC), Mrs. Uju Hassan-Baba, at the commission’s headquarters in Abuja, said it plans to invest in other sectors like manufacturing, processing and feeds selling, raw material additives, milk products and agricultural bye products, among others.
Chinese enterprises are also investing in seed cultivation and have become the Federal Government’s seed providers, a development that has raised local grain production.
The Chinese has been visible in the transport sector, especially in rail transport. The $1.49 billion Lagos-Ibadan railway contract has been awarded to China Civil Engineering Construction Corporation (CCECC) and the Olokola Deepwater Port project awarded to the China Ocean Shipping Group. The CCECC is also handling the 27.5-kilometre Marina-Iddo-Okokomaiko Lagos Light Rail project. Lagos State Governor Akinwunmi Ambode has assured that the multi-billion naira project will be completed within 12 months.
According to an Ernst & Young report on Nigeria issued for the 2014 World Economic Forum on Africa, CCECC is the main engineering, procurement and construction contractor for the Lagos rail mass transit project. The project’s first phase -‘Blue Line’ – is scheduled for completion towards the end of this year.
The state-owned Export-Import Bank of China (EXIM Bank) is also providing a $500 million concessionary loan for the 186-kilometre modernisation of the Abuja-Kaduna rail line, which includes the building of 36 bridges and nine fully-developed stations. The Federal Government will source the $374 million balance. Track laying for the single standard gauge line was formally launched in July, 2013.
Before his inauguration on May 29, Buhari hosted a delegation from the CCECC, who paid him a visit to present a prototype of its high speed rail project. Observers described the visit as an indication that the Buhari administration may be looking to develop a high-speed rail network across Nigeria.
Before his exit from office, former President Goodluck Jonathan resuscitated the comatose rail network with a N24 billion ($151.7 million) lifeline that involved the upgrade of tracks and signalling equipment. With the purchase of 25 GE locomotives, renovation of 500 wagons and passenger coaches, services have resumed on the 1,126-kilometre Lagos-Kano train route. The route had been shut for a decade.
The revival came on the heels of the inauguration of some air-conditioned, diesel-powered railcars and six 68-seater air-conditioned long distance coaches in June last year. The new rolling stock was procured by the Nigerian Railway Corporation (NRC).
It was part of Federal Government’s ‘25-year Railway Strategic Plan’, aimed at encouraging private investment for the renovation of the country’s existing narrow gauge railway lines and building new, standard-gauge lines.
That was complemented by China in 2012 with the formal opening of a Railway Technology Training Centre by CCECC in Abuja to assist Nigerians in developing the skills needed to support plans for rail and mass transit systems. The China Railway Construction Corporation Limited described its $8.3 billion rail network modernisation project in the country as its “biggest overseas project.”
Besides the rail and power plants, the Asian nation is also instrumental to supporting Nigeria with financial arrangements and investments in strategic infrastructural projects including road, airport terminals and free trade zones, among others. For instance, China and Chinese companies are major stakeholders in the Lekki Free Trade (LFTZ), Lagos. On completion, the project will attract international investors in the manufacturing, commerce and tourism, among other sectors.
The project is expected to provide 300, 000 direct and 600, 000 indirect jobs in the next few years. That informed the description of the LFTZ as one of the biggest Chinese projects in the country by former Industry, Trade & Investment minister Olusegun Aganga.
Telecoms, FMCG,
others also cornered
Chinese companies have since garnered a substantial share of Nigeria’s burgeoning telecoms/ICT market. Chinese enterprises, in collaboration with telecommunications operators, are instrumental to the unprecedented growth of Nigeria’s telecoms sector. Through the active participation of Chinese firms and investors, the Nigeria’s mobile phone subscription has grown from below 400, 000 in 2001 to over 140 million. The teledensity has also grown to over 100 per cent.
The popular Global System in Mobile telecommunication (GSM) villages in Lagos and Abuja, as well as several other commercial cities across the country bear imprints of China’s dominance of the sector. Most mobile telecom shops in the two city centres are stocked with China-made products, ranging from phones to laptops, Bluetooth devices to headphones and hands-free devices, among others.
For Seye Olatunji, a GSM trader at GSM/Computer Village, Ikeja, the business of selling China products has been exciting and rewarding.
His words: “It is usually more expensive to buy products from other western countries, but that is not the same for China. Most of us here can now go to China ourselves and buy products under very flexible terms and conditions.”
Even buyers share the same feeling. “If you compare the China smart phones with those from other countries, there is little or no difference at all. And the China ones are even cheaper. So, why should I spend more money on something equivalent to this one?” Audu Hassan, a customer at the Computer Village, asked.
General merchandising
is China’s forte
Scores of Chinese businesses dominate the retail segment of the market in various parts of the country. Brands such as Viju Milk, Huawei, ZTE, Alcatel and others are household names Chinese restaurants, such as Golden Gate, Lagos; Oasis Bakery all in Lagos and several other retail outlets businesses dot the landscape and they are enjoying tremendous patronage.
Since 2005 when it was established, China Town in Lagos, has been serving as a one-stop-shop for goods and services, ranging from textiles, shoes, jewelleries, electronics, kitchen utensils and other items. Visiting China Town, with its competitive pricing and accessibility has become a must for most Nigerian shoppers.
Why Nigeria is toast
of investors
That Nigeria has become the beautiful bride for Chinese investors is an open secret. Its bountiful but largely untapped natural resources; large domestic market of over 170 million; a growing middle-class with spending power and an increasingly stable polity, among others, have become irresistible to China and Asian investors.
Nigeria’s vast energy reserves, especially in oil & gas, may be all that is needed to fuel China’s growing industry. Africa’s most populous and largest economy with GDP size of about $500 billion is also the largest market for China’s industrial products in Africa. Nigeria’s imports alone from China account for over a third of its total trade with West Africa.
The volume of imports is projected to increase in the coming years, as Nigeria is tipped by various international rating agencies and analysts to overtake South Africa by 2025 if its current GDP growth rate is sustained. Nigeria’s relatively stable democracy is also believed to be one of the major factors why investors across the globe particularly China see the country as an investment destination.
Also, the ease of setting up businesses in Nigeria has improved through on-going reforms in the trade and investment sector. Returns on investment in Nigeria are relatively high, especially considering the exchange rate of the dollar to the naira with the major western currencies and the Chinese Yuan.
The pattern and dynamics of the Nigerian economy may have also opened the floodgate for Chinese companies to invest heavily. For instance, experts say that Nigeria’s transition from a manufacturing and agricultural producing nation to an import dependent economy may have broadened the retail sector, which now accepts virtually anything from anywhere in the world. This is the leeway through which Chinese investors and goods have taken roots in Nigeria. The emergence of a vibrant retail sector in Nigeria is also said to be as a result of the nation’s several porous borders.
Substandard products
from China as sore point
As Akabogu observed, Nigeria has benefited more from Nigeria. According to him, the balance of trade between both countries has tripled since the return of democracy in 1999.
“It’s been a mutually beneficial commercial relationship. China takes Nigeria’s oil as trade by barter for construction activities, which the Chinese government subsidises. What Nigeria exports to China are oil and a few agric products,” he pointed out. Akabogu added that Nigeria has been sending engineers to understudy Chinese engineering system at subsidised rate.
But, as rewarding as the relationship may be to Nigeria, there are concerns over alleged sharp practices by Chinese companies, anti-labour practices and perceived dominance of the market by fake and substandard products from China. The thinking is that the West may be lagging behind in the Nigerian market because of the quality of their products compared to cheaper and lower standard Chinese products. This is so particularly in Nigeria where consumers patronise cheaper goods more while being indifferent about quality.
But, as far as Director-General of Enugu Chamber of Commerce, Industry, Mines and Agriculture (ECCIMA) Sir Emeka Okereke is concerned, China is not to be blamed for the preponderance of substandard products in the market. He blamed the situation on Nigeria’s weak institutions. “It’s because of our inherent weak institutions that are unable to check the influx of substandard products,” he told The Nation, asking, “where is our Customs?”
He said Customs and other regulatory agency should wake up to their responsibilities. “Our borders and ports should be effectively policed especially considering that we are an import-dependent economy,” he emphasised.
Akabogu agrees with him. He said blaming China for fake and standard products in Nigeria amounts to throwing punches in the wrong direction.
His words: “It (substandard products) is a shortcoming on the part of regulatory institutions. That is why we’ve been canvassing the strengthening of institutions rather than individuals.”
The legal practitioner pointed out that there is need to reinvigorate institutions such as the Police, Economic and Financial Crimes Commission (EFCC), Independent Corrupt Practices and other related Offences Commission (ICPC) and Code of Conduct Bureau (CCB) among others. “It boils down to leadership question; it’s a credibility gap, a competency problem on the part of Nigeria’s institutions,” he insisted.
He also said every capitalist is in business to make profit and China is no exception. According to him, it is left for the host country to put measures in place to check likely excesses of foreign countries and their companies operating in its territory. Also, citing the Halliburton Scandal, which involved a U.S. company, he said sharp business practices are not limited to China alone.