Swallowed By The Dragon

Photo credit: www.digitaltrends.com

The Chinese Invasion

If you check around your house today, almost everything was made in China. Yes, from your tooth brush to your shoes. It’s even surprising that some of the items we ordered from the US were made in China. Oh yea, my iPhone too. At the back of iPhones, you’d see it written “Designed by Apple in California Assembled in China” – in other words, Made in China. I once thought that- How would Chinese feel going all the way to shop in America and ended up buying made in China products? Lol. Funny right?

China is ranked the second largest economy in the world next to US with industrialization that has quadrupled that of Asian Tigers. China is the Big Dragon. Total China’s investment trade in Africa account for 35% of China’s total revenue on International trade. Nigeria – China trade relationships is worth $13 Billion in 2013 alone. Bilateral trade volume between China and Nigeria represents 30% of China’s total trade transaction in West Africa.

Swallowed by the Dragon

No country can harm another economically without that country’s consent. In other words, a country can adopt its own trading and currency policies and need not to be influenced or harmed by the actions of any other country. In my opinion, Nigeria has consented to being swallowed by the big dragon many times.

I was privy to a snippet on one of the “bilateral agreements” signed between Nigerian Government and China in 2013. It goes like this -  … between President Jonathan’s delegation and President Xi Jinping, Premier Li Kequiang and other senior Chinese government officials include an Agreement on Defense Cooperation between Nigeria and China. Others are: an Agreement on Economic and Technical Cooperation; and Agreement on Finance for the Zungeru Power Plant and Airport Terminals; and an Agreement on Mutual Visa Exemption for Holders of Diplomatic and Official Passports.
Also agreement for the Central Bank of Nigeria to invest in China’s Inter-Bank Bond Market through the People’s Bank of China and an agreement for the prevention of the theft, illicit import and export of cultural property…..”

Now my question is what is bilateral about these agreements?

What we call bilateral trade in this part of the world is – tossing over a meal ticket to the other party while we feel they are here to help develop our economy. Based the supposed agreement cropped out above, there is no solid gain/benefit for Nigeria. Bilateral agreements should contain similar or equal proportion of benefits/advantages. 

There are over 200 Chinese companies registered in Nigeria that are engaged in construction, power, oil & gas, manufacturing etc. Most of them are doing quite well and grossing in returns as more Chinese companies are flocking in daily. We have provided enabling environment, tax moratorium, financing and moral cooperation. The scale is already overweighed on one side. What Nigeria needs in order not to be swallowed totally is what I call Fair Trade Exchange Agreement (FTEA)

Fair Trade Exchange Agreement (FTEA)

I should make this a whole topic but I will explain in simple terms. FTEA is give and take. It is about trade negotiations and exchange that has a tangible effect on both parties’ GDP or bottom line. I’m trying to distant this definition from BOT and BOP and I will do this by examples.

Now, if for example I am to offer a Chinese company a contract to build railway track from Lagos to Abuja that will cost $1bn; I will involve the Chinese government first then do my findings and analysis of China’s import demands against what Nigeria can offer. Here are some findings;

·China demands millions of metric tons of Cassava annually

·China’s main imports are electromechanical products (43 percent of total imports)

·Commodities; Crude Oil, Iron Ore, Copper, Aluminum, Soybeans etc.

(The share of imported components in China’s total export has fallen from a peak of 60% in the mid-1990s to around 35% today according to World Bank report but still no nation is  hundred percent self-sufficient).

Amongst these China’s major imports, Nigeria can confidently supply Cassava, Aluminum and Soybeans besides Crude Oil. So if I’m signing an agreement or awarding a $1bn contract, I should have guarantee that China will be buying from me at least $800m worth of tons of Cassava in a year.

Let’s Be Real

Ok. Let’s be real here. We probably do not have the capacity to handle such at the moment but what I have done here is creation of an open market; an opportunity. It is now left for me as a responsible Government or Minister of Agriculture or Commerce and Industry to put the right frame work in place for the ordinary individuals to be able to part take. If Joe knows that if he took a ton of Cassava (in right specification) to the nearest local government he will be credited in 48hours, then Nigeria is not far from becoming a Dragon on its own.