Nigeria-China trade imbalance to soar

— January 19th, 2014 (Lagos, Nigeria): Nigeria-China trade imbalance may continue due to the volume of export and import between Nigeria and China. This imbalance results from increased import from China which does not commensurate with Chinese import volume. This is contained in a working paper released today by Initiative for Public Policy Analysis (IPPA).

The paper titled “China in Africa: An Evaluation of Chinese Investment’ authored by Thompson Ayodele and Olusegun Sotola examines the nature of Chinese investment in Nigeria and Africa. It shows a clear trend that suggests China investment is largely beneficial to Africa, but that Nigeria and many African countries have not been able to diversify their exports beyond primary products. It notes that Nigeria potentials to secure a positive balance of trade with China based on her natural resource export to China was unrealised due to massive importation from China and that this scenario is very likely to continue.

The paper observes that a significant investment has come from Chinese state-owned enterprises but investment from the private sector is growing in an unprecedented manner. It however notes that Chinese trade and investment do not poses a significant threat to African economies but that gains from the trade relations with China cannot be evenly spread across countries because of differences in each country export potentials and the nature of exports to China as well as the volume of imports from China.

This paper also looks at the widespread concerns regarding the motives of Chinese engagement in Africa and finds that rather being seen as a new colonizer or exploiter, China should be seen as a partner in development.

“China has emerged as a key global leader. Its trade relations and investment activities in Nigeria and other African countries must be examined with the same rigour as that of the western countries. It is important that we separate the facts from the emotions on the ongoing international development debate on China real interest in Africa, this paper presents evidence that clearly shows that China grand interest is to develop domestically, coincidentally it is beneficial to Africa. What needs to be further examined is the sustainability of the present engagement and how governments in Africa can further build on it,” says Olusegun Sotola, a co-author of the study.

According to Olusegun, Chinese government imposes no political conditions on African governments before signing contracts either for exploration or other economic activities. Again Chinese firms are willing to invest where western companies are unwilling. Western investors and aid agencies are unwilling to invest in areas such as physical infrastructure, industry and agriculture which are critical to development in Africa.

The study also finds that China interest in Africa is not due to crude oil as widely claimed as only 9 per cent of Chinese oil is imported from Africa, while the United States imports 32 per cent and Europe 33 percent. It notes China’s economic rise is shaping the international order by introducing a new development paradigm. The economic growth in China and other Asian Tigers demonstrates that economic growth could be brought about by democratic or non-democratic government.

The paper concludes that African countries should take the opportunities offer by this engagement to diversify their export potentials. It argues that the key reason for Chinese relatively cheap products is the low labour and transaction costs. Wages are already rising in China as the China Cabinet promised to increase wages by 13% in 2015.The impact of the increase in wages in China would ultimately jerk up the prices of the products exported. This means African countries must be strategically positioned to take advantage of this.

Full Paper is available: http://www.ippanigeria.org/china_africa_working.pdf

The Initiative for Public Policy Analysis (www.ippanigeria.org) is an award-winning independent policy research organisation based in Lagos, Nigeria. IPPA has been consistently ranked (2009, 2010, 2011, 2012) as one of the most influential and the top think-tanks in the Sub-Saharan African.

CONTACTS:
For interview and contact, please mail Olusegun Sotola at info@ippanigeria.org or through the phone number (s) 01-791 0959; +234(0)8056706884

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