Chinas fdi to sub-saharan africa evidence of nigeria

This has attracted scrutiny, questioning the impact of these investments and if they are in line with the goals of Nigeria. The south-south foreign direct investments (FDI) have been successful in Nigeria since 1992-2010. This paper investigates the reason behind this success and the effects FDI has had in Nigeria. This paper will examine growth in the economic relationship between the two nations through data collection from relevant secondary sources. The conclusion is that FDI has resulted in positive growth in the Nigerian economy and success in Chinas goal to expand to Africa. Using Nigeria to enter the Economic Community of Western African States and increase their influence in the Nigeria oil and gas department. The mentioned countries had needs that complimented each other.

The Nigerian nation needed huge investments due to their financial deficiency whereas China needed a place they can expand their market. Thus investing in Nigeria helps improve the financial status of Nigeria while simultaneously creating a market for China goods in Nigeria (Weistbrod et al. China is known worldwide for its competitive construction companies. The relationship began in 1971, China was provided amour in support of the Biafra war. There are estimated reasons for the partnership in 1971. Nigeria got registered as a member of the Organization of Petroleum Exporting Countries in 1977. The oil industry was thus seen as a credible industry with supervision and regulation of policy enabling control over its functions. Nigeria was in a quest for resources to secure its energy, China offered developmental support to this country (Renard, 2011).

53 whereas Nigeria to China export value was $899M. Nigeria is importing at higher rates that the received exports to china (Alabi et al. The imbalance lies negatively on Nigeria. The imports of Nigeria are Vehicle parts generators, motorcycle, rubber, machinery and mineral working tools. After the diplomatic agreement between China and Nigeria was around USD 2. This paper examines the partnership between Nigeria and China approximately from 1971 and onwards. This paper analyses the partnership between the two countries, and the development initiatives that affect their economy directly and indirectly. This paper examines the effects of FDI in Nigeria, given that Nigeria is used as an investment hub for China to gain access to its petroleum and oil to enable it to sustain its ever-growing economy.

This paper aims to evaluate the FDI partnership between Nigeria and China. Additionally, the paper will discuss the benefits China brought to Nigeria other than the measures taken under self-interest. • To find out if Chinas FDI initiatives relative to neo-colonization. • To find out if the public approves of the China investment initiatives in Nigeria. LITERATURE REVIEW This paper examines the importance of the FDI on Nigeria’s growing economy by analyzing the dependent and independent variables. To achieve this, this paper will discuss the evolution of the FDI in Nigeria and how the China-Nigeria relationship has evolved (Oyeranti et al. There will be a proper explanation on the impact of FDI ob diplomatic connection and the economies of China and Nigeria.

Federal Capital Territory hospital in Nigeria received a donation that enabled them to accommodate 50 beds. There has been a significant increase in Chinas FDI to Nigeria that occurred between 1999-2006; this went up to approximately $5. 5 million in 2006. This is indicated in the figure below. Figure 1-Foreign Direct Investment To Nigeria(1999-2015) Table 1-Statistics of China’s Outward FDI to Nigeria (1999-2015) Year FDI Inflow YEAR FDI in flow 1999 $55000000. The purpose of these constructions was: • Facilitation of the development of the state and create an increase in the FDI: Kajola Specialized Railway Industrial Free Trade Zone • Ensure the rural livelihood benefit from employment. The processing companies to receive rice supply from the local farmers: Ofada Vee Tee Rice Limited. • Actively engage and see-through manufacturing activities: Ogun Guangdong Free Trade Zone (OGFTZ): • Create a market for about 120 shops meant for Chinese firms: China Town in Lagos.

• Attract foreign investment and establishing an offshore zone for economic growth. After the Tiananmen massacre, China and Africa begun trading in the late 1980s. The agreements were based on, technical cooperation, investments, telecommunications, among others. This was meant to ensure two-way investments benefiting both parties involved, (Oshikoya, 2008). The president mentioned that he had hopes that China and Nigeria would work together to improve the mutually beneficial trade activities, railway, and telecommunication construction, electric hydropower, investments, agriculture, and the manufacturing sector. This creates a possibility for the establishment of an innovative political and economic order that exists internationally. China mentioned that they aim to strategically improve its relations and cooperation with Africa. The News reports indicate that the Minister of Railways, Sheng Gaungzu was sent to attend the inauguration ceremony in May that year, (Kolstad et al.

This mended the relationship between the two countries thus they freshly committed to the improvement of their economic development and strengthened bilateral relationship that existed under this regime. China attempted to solve the challenge of power shortage Nigeria was experiencing in 2013. This was achieved through their investment in the construction of the Hydro-dam and provision of technical aid to ensure its successful completion (Chen et al. China also offered support to the agricultural sector in Nigeria. The Chinese State-owned enterprises (SOEs) dominating factors from energy to telecommunications is privately embraced by china. China dominates SOEs in china and sub-Saharan African countries as well. This means, in the mining industry, 30% of worldwide mineral services belong to Africa, in this the production controlled by Chinese SOEs is 15%.

This initiative is strategically designed to ensure Chinas share in the major industries in sub-Saharan Africa (Izuchukwu et al. The Nigeria Telecommunications Limited was sold to New Generation Telecoms Company a Hon Kong-based Chinese Unicom. The questionnaires were issued to 250 African students as well as Nigerian Faculty members. The table below shows the results from the survey, Table 4, shows that 24% of Nigerians oppose the idea that china in anyway practices activities that indicate neo-colonialism in their country (Sautman et al. This thus means china is seen as a developmental partner and not a threat. Table 3, shows the thoughts of Africans on the similarity in China-African interests. Surprisingly only 8 percent of Nigerians agreed. 8 250 Nigeria 5. 6 195 Sudan 5. 3 252 Total 12. 9 697 Number Source: Sautman and Hairong (2009) TABLE 5-Reported Satisfaction with “Chinese Companies that Work on Large Projects in My Country” Country Very Satisfied Neutral Dissatisfied Very Number Satisfied Dissatisfied (%) (%) (%) (%) (%) (%) Ghana 8.

0 246 Nigeria 12. pdf There are some major agreements on the foreign policies forming the basis of agreements between China and Nigeria. The table below indicates some of the agreements between Nigeria and China: TABLE 7- Major Agreements Between Nigeria and China (1997-2010) Year Agreement 1997 Joint Communiqué on the Establishment of Diplomatic Relations between the People’s Republic of China and the Federal Republic of Nigeria 2001 Agreement on Trade, Investment and Protection 2002 Agreement for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Tax on Income Agreement on Consular Affairs Agreement on Tourism Co-operation Agreement on Co-operation on Strengthening Management of Narcotic Drugs, Psychotropic Substances and Diversion of Precursor Chemical 2003 Agreement of South-South Co-operation among China, Nigeria and FAO 2006 Memorandum of Understanding on a Strategic Partnership 2009 Agreement against fake products exported to Nigeria from China 2009 Memorandum of understanding on promotion between Ogun State of Nigeria and Zhejiang Province of China 2010 Memorandum of understanding on Peace Co-operation Source(s): Egbula, M.

, & Zheng, Q. West African Challenges - China And Nigeria: A Powerful South-South Alliance. Sahel And West Africa, 5. FIGURE 2- China’s FDI Flow into Nigeria and SSA (2003-2007) STUDY AREA The selected study area for this research is Nigeria the subject being the Chinese FDI in Nigeria. METHODOLOGY This study utilized the qualitative analysis method. The research methodology entails a series of secondary sources dealing with costs, benefits and impacts of the study subject. Sources used are obtained from peer-reviewed journals, articles, books, blogs and news reports. This paper obtains options and analysis angles through qualitative analysis to examine the subject topic of this research. The data indicating trade rates between Nigeria and China were obtained from National Bureau of Statistics China.

KEY: GDP= Gross Domestic Product FDI= China Outward FDI inflow TV= Trade Volume between Nigeria and China ER= Exchange Rate ε = is the stochastic random term a= exports Equation 1: GDPt= a1 + a2 FDIt+ a3TV + a4 ER + ε The ACF This test was used to find out the level of autocorrelation in the variable used with the values in the similar series. ACF analyses series of actual data values. The ACF equation in this study goes as: Equation 2 Indicates serial correlation coefficient stock returns at lag k. Rt indicates stock returns with R as the number of observations. The equation is as follows: Equation5: Equation 6: Here: et is white Gaussian random vector. ao is a granger of aj if one of bj =1. Yt is a matrix.

Wt is white Gaussian random vector. co is a granger of cj if one of dj =1. At first difference there is presence of unit root test in the variables. The tables below indicate the results: Table 9 Table 10 Granger Casualty Test Result The table below indicates the results for the Granger Casualty Test Result: Table 11 This paper answers vital questions regarding Chinas FDI in Nigeria. Is the China-Nigeria relationship mutually beneficial to both countries? 2. Is Chinas FDI initiatives in Nigeria another form of neo-colonialism? The Nigeria-China bilateral trade since 2000 is indicated in Figure 4 and Table 10. FIGURE 4- Nigeria-China Bilateral Trade Statistics, 2000-2008 (USD millions) Source: Ayoola, T. 373 million in the year 2009. There is a trade imbalance in the two countries since Nigeria still lags in growth in Chinese manufactured goods exports to Nigeria.

This paper includes the argument that China is using FDI investments as a cover for its neo-colonial dependency initiatives. China is a developed country that has a steadily growing economic system which requires a steady supply of energy; whereas Nigeria compared to China is an underdeveloped country with infrastructural needs and economic instability. Thus the partnership between the two countries is made possible. c) Nigeria has five free trade zones created by Chinas FDI. The goal of the trade zones processing is increasing foreign exchange revenues and promotion. Numerous benefits have been enjoyed by the populations of China and Nigeria as a result of trade cooperation. The two countries have had a long relationship based on economic growth, political relations and bilateral trade.

The relationship between the two counties is a win-win with both countries aiding each other in achieving their goals. Despite the fact that FDI partnership comes with aligned shortcomings, the Nigerian economy has improved significantly. This goes to show that Africa being a resourceful continent is experiencing a growth that if maintained steadily will contain countries that will be potentially super-power. Change is inevitable. It takes goof spearheading to ensure that this inevitable change turns to be advantageous than otherwise. Nigeria’s domestic market is not a match for the modern growing technology. This indicates that Nigeria is developing drastically. The citizens are obtaining a better education, the city has better infrastructure and the development projects within the country are improving.

With the stated improvements, it means that the production rate of Nigeria is increasing. As people get more educated, the production industry in Nigeria develops. This means that the production rate of indigenous goods increases as well. The online reviews from workers in the Chinese firms indicate there cases of mal-treatment in some of these firms. This goes to show that some of these Chinese firms do not adhere to the Nigeria Labor Laws. 40 Nigerians were trapped in a Chinese factory in Lagos in 2002. The building had a fire outbreak that caused damages to both properties and human lives. Despite the effects of the fire on the 40 Nigerians that were caught in this incident. Clearly, low-quality goods are often cheaper. And the African markets are mostly to the belief that imported goods are of better quality than local goods even though this may not always be the case.

Thus Nigeria is flooded with poor quality Chinese produce creating a stiff competition against quality products available in the market. If looked at widely this only keeps the living standard of Nigeria below the living standard of China. This was until 2009 when an agreement was signed between China and Nigeria limiting the importation of substandard goods in Nigeria from china. There are numerous advantages to using local experts rather than Chinese imported experts. Local would have a better understanding of the country and offer lasting solutions. This increases the employment rate in Nigeria, locally obtained services are cheaper than imported services thus the country saves money that can be used to fund other projects. The FDI is meant to aid the underdeveloped countries to overcome the challenges they face as a country.

The funds come in as investments, low-interest loans, infrastructure developments and trade activities. Nigeria has a big potential for steady economic growth and better financial status compared to many other African countries. However, like most other African countries Nigeria is struggling with challenges like weak policies, poorly structured institutions, corruption, lack of proper governance and lack of required governmental transparency. This acts as a major setback in terms of development and if not addressed appropriately it will continue crippling the development of Nigeria. CONCLUSION Among the major deficit in Africa is infrastructure, this is clearly evident in the health, power and different sectors of the African economy. This thus creates the need for measures such as the FDI. The corruption goes as high as the government official to privately-owned sectors aiming at personal enrichment at the cost of the country’s development.

Such challenges prevent Nigeria from developing economically and growing to its full potential. The Nigerian government lacks proper accountability measures. Over the years that Nigeria has been receiving FDI from china and forming numerous partnership agreements, this has however not brought Nigeria to an independent economic position as it should be. The assumption would be that over the years Nigeria has partnered with China, the country would have developed massively but rather that is not the case. Its economic stand is stable and continuously growing and Nigeria is one of the countries benefiting from the economic and bilateral partnership with China. This paper examined what impact the Chinese FDI has had on Nigeria’s economy. Nigeria stands to benefit from China and the economic growth of Nigeria is evident.

However, China has a quest to benefit from the Nigerian oil sector which means it has to apply measures to ensure a long term benefit that ensures they have what they seek. Thus Nigeria needs to seek and apply strict measures to eradicate their corrupt political system and develop policies that protect their country from the exploitation of any form. w17544). National Bureau of Economic Research. Renard, M. F. China’s Trade and FDI in Africa.  Asian Economic and Financial Review, 4(3), 361. Oyeranti, O. A. , Babatunde, A. M.  African Development Review, 25(4), 421-433. Whalley, J. , & Weisbrod, A. The contribution of Chinese FDI to Africa's pre crisis growth surge.  Global Economy Journal, 12(4), 1850271. Y. , Ukaejiofo, R. U. , Xiaoyang, T. , & Bräutigam, D. B. , & Adeniyi, O.