Former Director-General of the Nigerian Institute of International Affairs (NIIA) Prof Bola Akinterinwa, in a paper delivered at the Africa Today’s summit on China-Africa relations examines President Muhammadu Buhari’s visit to China. Excerpts:
President Mohammadu Buhari (PMB) paid his first visit to China as President of Nigeria on Sunday, 10th April, 2016. It was a 4-Day State Visit aimed at enhancing bilateral relationship with China and securing the support of the Chinese for Nigeria’s development agenda. For this purpose, PMB led a high-level delegation to China.
The visit took place amidst many controversies: complaints about the many travels of PMB: the visit to China being the 28th in ten months of his tenure; refusal to sign the 2016 budget before travelling to China; unending crisis of fuel scarcity; deepening discontent over power outage; the trial of the Senate President, Bukola Saraki; unveiling of high-level corruption charges by the Economic and Financial Crimes Commission (EFCC) against public officials, notable elder statesmen and professional politicians; and perhaps most importantly, controversy over how to fund the 2016 budget deficit.
The visit is now a fait accompli, yet the aftermath is still generating a lot of controversies: should the $6 billion Chinese loan be taken or not, especially in light of the conditionality attached to it? China has subjected the granting of the loan to Nigeria’s readiness not to have any dealing with Taiwan. Apart from this, Nigeria can access the loan without any further requirement of negotiation and agreement.
In this regard, to what extent is the deal beneficial to Nigeria or mutually beneficial to both countries? To what extent did the visit help to further consolidate the goodness in the relationship? It is useful to note that the foundation of Nigeria-China relationship was not strong. When, for example, the Chinese Premier, Zhou En-lai, embarked on a tour of ten (10) African countries in the later part of 1963, Nigeria was excluded from the list of countries visited. Probably for reasons of reciprocity, Nigeria didn’t receive the visiting Chinese delegation to Nigeria in 1964 warmly, showing no disposition for an alliance with the communist nation. Nigeria did not show favourable disposition to an alliance with the communist nation. Again, probably as a result, thereafter, China also excluded Nigeria from the infrastructural assistance she provided to other African countries at that time. Thus relations between both countries at that time were not only minimal but also largely predicated on little regard for one another.
However, the misunderstanding was later removed, thanks to some centrifugal dynamics, to the extent that the relationship has moved from ordinary cooperation up to that of strategic partnership. In this regard, in whose benefit has the bilateral relationship been or who is benefiting more than the other in the relationship? In fact, what is the nature of the relationship? Is it exploitative in character? In which way is it different from Nigeria’s bilateral relationship with any of Nigeria’s traditional allies? In attempting some explanations to the foregoing questions, it is useful to explicate, briefly, the main dynamics of the relationship on the one hand, and Sino-Nigerian foreign policies, on the other. The two analyses will enable the provision of an analytical background to PMB’s visit to China, assist in determining whether the visit is worth it, as well as help to determine the possible foreign policy directions of the two countries.
Issues in PMB’s State
Visit to China
Three main issues were raised before and following PMB’s visit to China. Before the
visit, many observers considered that Mr. President’s many foreign trips as too frequent, frivolous and of no benefit, but this will not warrant attention here. However, even though the trips generated much debate, PMB’s visit to China led to the signing of some agreements which have raised the issues of offer of assistance and loan, on the one hand, as well as the issue of Currency Swap, on the other.
Offer of Assistance and Loan
On Wednesday, 13th April, 2016, Chinese President, Xi Jinping, offered Nigeria a $15 million agricultural assistance for the establishment of fifty demonstration farms across the country. The President and Chief Executive of the Dangote Group, Aliko Dangote, the Chairman of the Industrial and Commercial Bank of China (ICBC), Mr. Jianqing and the Chairman of China Export and Credit Insurance Corporation (SINOSURE), Mr. Wang Yi signed a $2 billion loan from the Industrial Commercial Bank of China Limited for two cement plants in Beijing.
China granted Nigeria a loan of $6 billion for infrastructural development, accessibility to which is subject to two main conditions: identification of projects for which the funds would be expended; and no official dealings with Taiwan. This was followed by the signing of an agreement meant to establish one of the biggest granite and processing plants in Africa. In this regard, Shanghai Machinery Company Limited and Nigeria’s Marble Limited signed an MOU to establish plants for assembling mining equipment and to support capacity-building for the industry.
The loan has not only raised many issues but has also attracted proponents and opponents. Some Nigerians have opposed the loan, arguing that Nigeria is again being brought to the path of deepening indebtedness. For instance, former President of the Nigerian Bar Association, Mr. Olisa Agbakoba, SAN, has expressed much concern about the agreements, especially in terms of their legal framework. As he expressed it: ‘I’am concerned that such a complicated process was finished in one week. I’m concerned about what legal framework was used because in international trade, there are two frameworks: multilateral, under the WTO, which this is not, or bilateral investment negotiations. So I don’t know if this is bilateral investment or simply bilateral trade. These are very important clarifications because they carry different consequences.’
Senator Florence Ita-Giwa, former Presidential Adviser on National Assembly Matters, has advised PMB to tread cautiously when dealing with bilateral trade and strategic cooperation with the People’s Republic of China. As she put it, ‘inasmuch as President Buhari is consolidating the bilateral relation that exists between the two countries, I want him to take a firm stand in the areas of quality. Nigeria should not be a dumping site for fake and sub-standard products. The best way to tackle this is to create dynamic quality control units.’
Dr. Ayodele Fayose, the Governor of Ekiti State, is not only strongly opposed to PMB’s visit to China, but has actually written a letter to the President Xi Jinpin of China, requesting that no loan should be given to the Government of PMB. The letter, in itself, has generated a new controversy. The ruling party, All Progressives congress (APC), has condemned the $2 billion loan request by the Federal Government of Nigeria and considered Governor Fayose’s letter as a ‘seditious conduct that must not go unchallenged.’ Taiwo Olatunbosun, the Public Secretary of the APC, says ‘even though Fayose has the right to entertain himself being a jester as he has always been, this should not be taken to the extent of constituting a security risk to the Federal Government.’
As also noted by Adeleye Akintola, the General Secretary of the Asiwaju Grassroots Foundation (AGF), ‘the recent outburst and action of the Governor is a violation against Nigeria and its people. The Governor’s letter is an affront and a sabotage that can only be compared with staging a coup against the country.’
Governor Fayose’s reaction, describing his critics as hypocrites, is noteworthy. He did not see any wrong doing in his action because ‘it is on record that APC wrote to the United States not to sell arms to Nigeria, reported the country to the European Union, United Nations, and went to the bizarre extent of reporting the then Chief of Army Staff, Azubuike Iherijika to the International Criminal Court.’ He noted further that ‘on one occasion, a certain APC stalwart insinuated that Jonathan’s visit to Chad was to plan further attacks on the North.’
Consequently, Governor Fayose not only gave reasons as to why China should not grant any loan to Nigeria but also asked why a loan should be taken. In his words, ‘with the $200 billion they claimed is coming from the United Arab Emirates, $700 million raw cash they said was found in Diezani Allison-Madueke’s house, N3 trillion said to have been saved from the Treasury Single Account (TSA), and N4.5 trillion the Federal Inland Revenue Service (FIRS) said it will generate this year, what then is the rationale behind the Federal Government seeking any loan?’
Senator Ben Murray-Bruce has argued in the same vein, suggesting that Nigeria should not increase her indebtedness but should seek other avenues for revenue generation. He suggested that Nigerians in Diaspora constitute a good source as they are currently the single largest source of foreign direct investments to Nigeria. He noted that in 2015, more than US $20 billion was injected into the Nigerian economy by the Nigerian Diaspora. Besides, policies that would reduce, if not eliminate completely fraud and risks, should be adopted by the Central Bank of Nigeria, and, above all, even though loan taking has merits, there is still the need for Government to ‘think creatively.’
The issue of the loan to be taken from the Industrial and Commercial Bank of China (ICBC) was also raised. It is argued that the loan agreement was not done with the Chinese Central Bank or Government of China directly. In other words, the ICBC is not owned by the Government of China. This is true but there is nothing to suggest that the loan can be detrimental to Nigeria’s interest or inhibit Nigeria’s capacity to meaningfully take advantage of it because of the private character of the creditor. For as long as the ICBC has the support of the Chinese government, the loan is in order. However, where the critics of the loan may be right is in the area of conditions of the loan which have not been made known to the public. It is necessary for this to be made known for the purposes of transparency.
Currency Swap
Additionally, the Nigeria-China currency swap deal is another issue currently generating controversies in the print and electronic media. Currency swap is an arrangement by which countries facing foreign currency liquidity challenges agree to trade in their own local currencies, at a negotiated and pre-determined rates of exchange without the use of a third currency. As noted by Joseph Uwaleke, there has been an increasing currency swaps agreements by Central Banks, following the financial crisis of 2008. The currency swap agreements generally are done for three years and are meant to stabilise the international financial market as well as facilitate bilateral trade and investment.
Like the case of the loan from the ICBC, the currency swap agreement is still shrouded in secrecy. There is no information on the size, duration, cost and effective date of the swap. Besides, the Foreign Minister reportedly had said that there was no currency swap between Nigeria and China contrary to many other reports. However, according to Lin Songtian, Director General of the African Affairs Department of the Ministry of Foreign Affairs in Beijing, the currency swap ‘means that the renminbi (Yuan) is free to flow among different banks in Nigeria and the renminbi has been included in the foreign exchange reserves of Nigeria.’
In the same vein, Mr. Godwin Ifeanyi Emefiele, Governor General of the Central Bank of Nigeria, has explained that ‘the agreement on the currency swap with China will definitely benefit Nigeria because the essence of the mandate is to ensure that Nigeria is designated as the trading hub with China in the West African sub-region for people who want the renminbi as a currency denomination.’ He noted further that ‘using the renminbi will improve trade with China, as this will encourage importers to open Letters of Credit in the Chinese currency for the importation of raw materials, equipment and machinery from China, rather than other trading regions, so the agreement will encourage trade between countries.’
Johnson Chukwu, Chief Executive of the Cowry Asset Management Limited, a Nigerian Financial Advisory and Research Firm, also has it that ‘about 22% of Nigeria’s exports will be settled in the Yuan instead of the US dollar, which will relieve the country of much pressure on foreign reserves at this time.’
Concluding question:
In whose larger benefit
is the relationship?
We believe, and strongly too, that the present state of Nigeria-China relations, and particularly PMB’s visit to China is mutually benefitting. At the level of China, the Chinese are seeking to assert themselves as a global power. They want to grow their economy. They want their currency, the Yuan, to have the same international value and impact in international financial relations. Nigeria is internationally recognized as a terra cognita for profitable business and genuine and honest business investors. China is therefore much interested in Nigeria. Without doubt, the Chinese are also actually indirectly challenging the domination of the US dollar and leadership in global affairs.
At the level of Nigeria, there is the need to fund the 2016 budget deficit of about $11.1 billion. The financial outlay is about $30 billion out of which $13 billion is for recurrent and $9 billion is for capital. How should this challenge be addressed? In this regard, Nigeria reckons with the fact that China currently accounts for about 22% of total importations from Nigeria but only 2% of Nigeria’s total global imports. China is seen as a possible strategic source of alternative funding, as well as a source of tension reducing at the level of foreign exchange liquidity challenge in terms of access.
This is why PMB’s visit to China is currently adjudged as the best of all his foreign visits to date for obvious reasons. First, as noted earlier, China has offered a credit line facility of US $6billion on preliminary two conditions: articulation of projects for which the loan is to be expended and no official dealings with Taiwan. We talk about preliminary conditions for now because tomorrow is difficult to predict. On the issue of projects, it is agreed that the funding will be largely for transport infrastructural development: railway, airport, road, etc. There can be no problem in articulating Nigeria’s priorities at this level.
Regarding the conditionality of ‘no dealing with Taiwan’, this is at best irrelevant because Nigeria has been supporting Beijing on its policy of ‘One China, Two Systems” since the inception of the policy in the 1970s. This was why Nigeria promptly accepted the change of status of Hong Kong, initially regarded as a trading post, to that of ‘Consulate General when it was returned to China in 1997.
China has also offered $15 million for agricultural development assistance. The gains of this development assistance cannot but first be for Nigerians and for the Chinese later. They will come back to reap part of what they would have sown. Agreements were done in the same vein in the areas of civil-military partnership, trade and investment, aviation, and scientific and technological cooperation. All these agreements are nothing more than intended investments that are expected to yield positive results in the near future.
In the eyes of the general public, the deepening of relations with China, though coming late is still a most welcome development.
In conclusion therefore, it can be rightly posited and submitted that, as at today, the relationship is more benefitting to the Chinese but in the long run, there is no way it will not be more benefitting to Nigerians. The extent to which Nigeria and China will not forge a formidable alliance contrary to China’s foreign policy on the matter is a matter of speculation. Time will tell. The same is also true of Nigeria’s sovereign right to decide to form an alliance with China. The truth is that, for now, it is very difficult for Nigeria as a sovereign state to breathe well on the basis of how Western countries relate with Nigeria in the area development politics.
It should be recalled that PMB made it clear in China that he would honour all the obligations required in the agreements signed by his predecessors. The implication of this is renewal of commitment and seriousness which can only ginger the Chinese to reciprocate. Consequently, PMB’s visit to China is a consolidation visit, a follow-up visit meant to renew the seriousness of purpose of the Government of Nigeria. Contrary to some suggestions, it is not a radical shift from the values of westernisation to socialism, cordial relationship is to make the traditional partners see more clearly before the rain is gone (to borrow from Johnny Nash) that Nigeria cannot continue with the current international economic order to her own detriment.
The summary of Nigeria’s relations with, and PMB’s visit to, China and is nothing more than ‘making new friends, but keeping the old, for one is silver, the other is gold.’ On this basis, and in a Gowonian style, ‘no victor’, ‘no vanquished’ but potential winners and winners if the Government of and people of Nigeria will not allow the good opportunity provided by the commitment and goodwill of PMB to permanently nip institutional corruption and mismanagement of scarce resources in the bud in Nigeria. But so far, it is a win-win situation. Click to signup for FREE news updates, latest information and hottest gists everyday
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