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Paradox of Chinese invasion and Nigeria’s industrial rebirth

Paradox of Chinese invasion and Nigeria’s industrial rebirth

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Published: 21 August 2013

Within the last decade, trade relations between Nigeria and China have witnessed a tremendous growth, with continuous efforts towards deepening the process. This growth is however not without criticisms. The first category of criticisms of the Africa-China economic relations has been termed Western-inspired, bordering on the Chinese breaking of the West’s hold on Africa-World trade, while the second  consists of genuine grievances by Africans themselves concerning trade malpractices by the Asian Tiger. With renewed investments in key sectors of the nation’s economy, it is obvious that China is ready to spend big in Nigeria and run ring around African governments. The Asian country expects to leverage its own huge spending in Africa on how to compete in complex markets. China finances more infrastructure projects in Africa than the World Bank and provides billions of dollars in low- interest loans to the continent’s emerging economies. These loans and investments are typically made in exchange for securing access to natural resources. The cost of such investments to local manufacturing remains a source of concern to stakeholders owing to some unpalatable deals of the past by the Chinese across the real sector. Will Nigeria adopt wholly China’s unconditioned approach or a more responsible engagement strategy? FEMI ADEKOYA and DEBORAH SUNMOLA write.

DESPITE the negative reports in the foreign media, investors and retail chains both foreign and local, have eager to tap from the nation’s clear potential – a large population, positive macro-economic growth and a strong appetite for consumer goods, thus, dramatically expanding their domestic retail footprint in the country.

As commendable as the growing trade relations may be between Nigeria and the global markets, the growing trade imbalance and malpractices is a huge source of concern for stakeholders within the real sector of the nation’s economy.

For instance, the multilateral Trade Facilitation Agreement by the World Trade Organisation (WTO) holds real economic deliverables for a country that has the potential to exploit its comparative advantage in labour and other key industries.

However, the influx of finished goods to many developing countries has undermined the production capacity of many companies in such countries, Nigeria inclusive, with developed economies thriving on low trade relationships among developing economies in Africa.

Unarguably, Nigeria’s manufacturing and industrial sector is yet to find a lasting solution to its various structural problems, the intrusion of Chinese businesses in the real sector has further limited the chances of quick growth of many industries. 

The Central Intelligence Agency (CIA) World Fact book on Nigeria for 2013 revealed that the United States is the top destination for Nigerian exports, followed by India, Brazil, Spain, and France, while on the other hand, China is the lead source for Nigerian imports, followed by the United States, the Netherlands, South Korea, and the United Kingdom.

It is believed that an ideal transformation agenda among other things, seeks to transform the economy, through the real sector, from one characterised by low saving-investment ratio, low growth, high interest rates and taxes, low productivity and low technology into an economy of high saving-cum-investment, high technology-cum-productivity and high sustainable growth rates.

Contrastingly, not much seem to have been achieved in this area. Having squandered its many years of oil proceeds through misrule and corruption, the federal government is in dire need of new avenues to create jobs and engage its teeming unemployed youths.

From extractive industries to energy; from transport and infrastructure to telecommunications; and from manufacturing to Agriculture or raw materials, China holds sway in Nigeria, out-competing the West in every sense of the word.

However the concerns coming from African policy makers, business leaders and real sector stakeholders who want a win-win arrangement between Africa and China should not be ignored. Against the bias that interest of the West is being protected, many of these stakeholders speak on behalf of African interests and hold no brief for Western nations. 

For instance, the Asian new giant had had (and, perhaps, still has) a field day in Nigeria’s energy sector, infrastructure, construction and, most recently, hospitality sectors. Its incursion saw the light of the day following the re-introduction of democracy in 1999, with Chief Olusegun Obasanjo as civilian head of government.

Riding on the back of home government support, Chinese companies won oil blocs, secured contracts in construction and railway projects and enjoyed consolidated grip on strategic sectors of economic growth. That was to change when the late President Yar’Adua took the reins of power and halted some of the contracts, including proposed modern railway projects. 

Energy challenges notwithstanding, Chinese firms made an inroad into manufacturing, provided self-sourced power for production and created jobs in a manner that was also considered very controversial.  There was high immigration rate of Chinese citizens who thronged the Murtala Muhammed International Airport to provide labour that eludes the Nigerian casual workers in most of the companies.

Given the history of collaboration and partnership between Africa and China in the struggle against colonialism and imperialism, there are high expectations from the economic ties between the two blocs. These high expectations are rooted in a history of solidarity and shared aspirations.

  Specifically, some of the concerns border on the extractive trade in raw materials without value addition; understating the value of unexploited natural resources; bringing labour from China with low employment of locals; little or no skills or technology transfers; buying primary goods and selling Africa manufactured goods; unfair local labour practices; and cheap Chinese goods (sometimes low quality) undercutting African products.     

   All these activities, some Africans critics contend, have contributed to the deindustrialisation and underdevelopment of Africa. In particular, the African textile and leather industries have been decimated by cheap Chinese imports.

   Indeed, the Lagos Chamber of Commerce and Industry (LCCI) had called on government to revisit its protectionist policy in order to protect existing jobs within the Distributive Trade Sector.

  Worried by the increasing number of non-nationals, especially Asians, in the retail segment of the economy, especially the open markets, the Chamber, in a communiqué issued at the end of its meeting recently, noted that the increasing number of expatriates in the retail segment of the economy is beginning to have a negative impact on the economy, especially in terms of employment generation. The communiqué read in part: “Council noted with concern the increasing number of non-nationals, especially Asians, in the retail segment of the economy, especially the open markets. This has resulted in the gradual crowding out of indigenous enterprises in the Distributive Trade Sector. Council therefore calls on the appropriate agencies of Government to quickly address the problem in order to protect existing jobs in the sector.

   Similarly, former Chairman of the Nigerian Economic Summit Group (NESG) and President, Abia State Think Tank Group, Mazi Sam Ohuabunwa, decried the high level of intrusion of Chinese businesses in the clothing and leather market, citing its effect on the Aba industrial hub.

   According to him, the shoe-making business, which once made the Ariara Market an African destination for footwear buyers, is being asphyxiated by poor infrastructure, low patronage and unhealthy imports from China and nearby countries.

   He added that China’s shoe market thrives at the expense of Nigeria’s simply because no real effort is being made to expand the sector that currently employs over 50,000 youths and contributes reasonably to Abia State government’s revenue.

   He noted that though foreign competitors are now able to produce neater products with the aid of effective cutting and heating machines, a situation that poses serious threat to local manufacturing, Nigerians’ penchant for foreign goods has forced local manufacturers to imitate foreign-made shoes; hence, they (Ariara shoe makers), sometimes, imprint marks like made-in-Italy on their products.

   He explained that made-in-Nigeria products lack competitiveness in the global market due to branding challenges and lack of acceptability in the local markets.

   He noted that that a lot of small businesses still do informal trade with many countries, thereby limiting the growth of small industries as well revenue to be generated from such transactions.

   He said: “The forthcoming Aba Commerce Summit on Development of Abia State is designed to showcase made-in-Nigeria products and discuss how opportunities in export markets can be harnessed. If we are able to drive investments to the state, the level of unemployment in the state would reduce.

   “Aba is the only industrial hub where goods are manufactured locally with indigenous technology and for the export market. However, the key challenges of that industry are that of pricing and branding. Many informal trades are transacted between Aba and other world regions. These products are most times not labelled and sometimes, such products are eventually imported into the country again.”

Some members of the Abia Think Tank group attributed the decline in the shoe-making business to lack of basic infrastructure to push the trade, while low consumption of locally manufactured goods by government and its agencies as well as inadequate protectionist policies continue to make doing business in the country difficult.

President, Phone and Allied Products Dealers Association (PAPDA), Computer Village, Iyke Nwosu, decried the trade malpractices from Chinese businessmen in the markets. 

According to him, many sub-standard products, especially mobile phones, are brought into the market through different dealers who distribute them to other phone dealers.

He explained that though the association was working with dealers on quality control, there is much to be done on the part of the government in terms of reviewing and enforcing laws relating to expatriate quota and dealings in Nigerian retail markets.

On why government agencies are not curbing addressing the Chinese intrusion in the markets, Director-General, Standards Organisation of Nigeria, Dr. Joseph Odumodu, noted that SON was not empowered to prosecute violators of trade laws.

He noted that although the agency has improved its litigation processes, the federal government might need to review its laws, especially ones relating to trade activities by foreigners.

The General Secretary, National Union of Textile, Garment and Tailoring Workers (NUTGTW), Isa Aremu, in a recent chat with The Guardian called on the federal government for increased funding for the sector, noted that inadequate protection of the sector has led to the dearth of productivity in the sector.

Specifically, the textile sector according to experts was one of the major victims of World Trade Organisation (WTO) agreement, which left the nation’s sector unprotected, thus leading to the influx of cheaper textile imports, predominantly from China, as well as second-hand clothing from the United States of America and Europe.

A Sociologist, Ayodele Sunmola, tasked Nigerians on the need to patronise indigenous firms if employment would be generated for the teeming unemployed youths.

He then urged the government to address issues affecting small businesses in the country, especially ones relating to access to finance and ease of doing business in the country.

Director-General, Nigeria Employers Consultative Association (NECA), Segun Osinowo, in a chat with The Guardian, recently believes that the trade ties between China and Nigeria can be enhanced if properly harnessed. 

   He said: “Beyond investment inflow, what we really need to look at critically is the one that, beyond the investment that will promote our economic growth and development, is it an investment that will resolve our unemployment issue? I think that is the aspect we really need to examine. What is the employment content of this investment? Going by simple rule of economics, investment should promote economic growth and development. But, based on the kind of economic growth and development that we are going to have, will it promote job content as far as Nigerians are concerned? I think that is where the Nigerian government should really come in and give life to its own rules and regulations, to ensure that beyond hard cash moving into this environment in terms of investment, that investment actually translates into decent work. 

    “To a large extent, that might be the missing link in all of these. And I can understand why it is so. Because at a point in time of trying to encourage the would-be investor, the truth about it is that no government that has its’ head in its’ right place should be looking out for employment content. To certain extent, I can understand the disposition and strategy of the Nigerian government. Once the investment has been secured, there are various ways you can catch up with them in terms of taking a look at the employment content. That is why the various institutions – the ministry of internal affairs and immigration services, must wake up, have their guidelines in place and ensure compliance.

   In one of his presentations, the Deputy Prime Minister of Zimbabwe, Prof. Arthur Mutambara, tasked African countries on the need to take responsibility for their actions, saying: “Given all these challenges, what should be the African strategic response? First and foremost African countries must not blame China. We must take responsibility for our own problems and solve them. In fact, we must blame ourselves for the current plight of Africa, including these Chinese excesses. 

   “Most of the African countries attained political independence more than 50 years ago. Certainly, there are problems whose roots you can trace back to slavery, colonialism, neo-colonialism or apartheid. However, we cannot use this problematic African history to justify incompetence, corruption, lack of economic vision, inept economic planning, poor execution, and now clumsy negotiation capacity. The time for excuses is gone. Africans must wake up and take charge of their lives.”

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