Though Nigeria’s participation at the just-concluded Forum on China and Africa Cooperation (FOCAC) summit in Beijing, was widely celebrated particularly in government circles, analysts have expressed the need to review some of the trade deals, as they appear inimical to the country’s economic aspirations, writes James Emejo
The recent trip to China has been adjudged as highly successful given that several trade deals were signed by President Muhammadu Buhari, who led a high-level delegation consisting ministers and other key cabinet members to the summit.
According to the Minister of Industry, Trade and Investment, Mr. Okechukwu Enalemah, who was part of the delegation, a total of 13 memorandum of understanding (MOUs) valued at $10 billion were signed during the bilateral talks with the Chinese government among other ongoing discussions, which are yet to be quantified.
The agreements covered activities in ICT, industry, trade and investment, transportation among other critical infrastructure key for economic diversification.
Already, some analysts have argued contrary to insinuations, that previous government trips to China had actually translated into some concrete and laudable projects in the country including the successes so far recorded in rail transportation and power- which are tied to the fruition of the voyage to the Asian economic powerhouse.
Nevertheless, there’s growing concern over the huge trade imbalance between both economies as well as the model being currently operated with China.
Nigeria’s second quarter trade statistics continuously indicated that its import from China accounted for 25.28 per cent of total trade while the latter imported little or nothing from the country.
Observers continued to query the use of the country as dumping ground for all sorts of Chinese products without real value to the economy.
Efforts over the years to have China set up companies in the country so as to bridge the unemployment gaps had not yielded much results.
Analysts further expressed concerns that the recent trade agreements between Nigeria and China could suffer political risk of being abandoned by successive administrations.
They also further advised the federal government to discourage the $5 billion import financing line offered by China as this will worsen the already lopsided terms of trade between both countries.
But, there had been criticisms over the seemingly limited successes so far recorded with respect to previous MoUs between the Asian and African economic giants.
The highpoint of the argument is that past trade deals with China had not made the desired impact on the economy in terms of job creation, as China continues to use the country as dumping ground for its manufactured products.
There are further concerns that the recent agreements are only a desperate ploy by the current administration to score a political point especially as the 2019 general elections draw close.
However, in an interview with THISDAY, Professor of Finance and Capital Market at the Nasarawa State University, Keffi, Prof. Uche Uwaleke, though commended the latest agreements signed by Buhari, but feared that they could be politicised going forward.
He said: “That said, the major risk I foresee in all these agreements is political risk, the risk that they will likely be jettisoned by successive administrations.
“So, the government should put in place enough safeguards to ensure that regardless of the party in power come next year, the implementation of the agreements is not negatively affected.”
He added:”We should worry about the disproportionate trade imbalance in favour of China. The high likelihood of dumping and the suffocation of local companies in Nigeria should give cause for concern.
“In the spirit of ‘Nigeria first’ and consistent with the import substitution Strategy and Economic diversification objective, economic relations with China should focus more on direct investments in critical sectors of the economy such as infrastructure and ICT that enable industrialisation.”
Also speaking with THISDAY, on the country’s trade romance with China, a former Managing Director of Unity Bank, Dr. Mohammed Rislanudeen, paticularly urged the federal government to discourage the $5 billion import financing facility by China as “will only help in worsening the terms of trade that has for years favored the Chinese. The relationship should be built on symbiosis and mutually beneficial.”
He said though the loans in the trade deals come at concessionary interest rates and longer term tenure with no political conditionalites, there remained the hidden fact that the core contractors will be Chinese firms while critical inputs must also be imported from China, a situation which he said was not in the country’s overall interest.
He, however, warned of the negative implications of the current imbalance in trade between both countries.
Rislanudeen said: “We have cause to worry because the terms of the relationship is lopsided. We do not need any import financing loan to import from China and in the process make our small and medium scale industries difficult to survive competitively.
“Chinese are using their resources to oil their economy by finding market in Africa. Over time, we will start having challenge with repayment capacity, our debt to revenue ratio etc. We would have been better off, if government engage the Chinese to invest directly in Nigeria under special arrangement, public private partnership for example, that protect their investments with even tax holidays. With that we will be assured of job for Nigerians and technology transfer as well.”
Continuing, he said:”We need to be careful with foreign loans unless they are transaction tied and with capacity to repay themselves given our present elevated foreign and local borrowings.”
“We should also ensure that projects are productive with potential multiplier effect on the real sector of the economy to support growth and employment generation rather than white elephant, vanity projects that will only satisfy ego and sentiments.
He said going forward, the federal government must insist the Chinese invest directly in Nigeria through special arrangements like public-private partnerships (PPP) and some special concessions to support our growth and technology transfer.
In the same vein, CEO, Global Analytics Consulting Limited, Mr. Tope Fasua, also expressed grave concerns over the country rising debt portfolio with China as well as need for prudence in the management of generated revenues.
In an interview with THISDAY, he said:”I believe the bigger thing to worry about is ourselves and the growing conflation of loans with revenue or the way we easily justify loans ‘so long as it’s for infrastructure.”
“This philosophy cloaks the need for fiscal responsibility- ramping up internal revenue, protecting such and deploying such for our most basic needs. We end up squandering internal revenue and then go cap in hand borrowing from everywhere and seeking for favours. We therefore lose dignity and will fund it tough to lift off from a state of morass.
“I’d say that China presents a better option than the West to whom we have become extremely devalued but we are talking about the lesser of two evils. The evil is our lack of fiscal discipline and loss of dignity in every way. I challenge the philosophy that argues that all countries are borrowing. All countries are not the same.”
“They have different strengths and weaknesses. Very few countries also have Nigeria’s record of profligacy around loans. Trade is permanently skewed against Nigeria as compared with countries like china simply because we haven’t developed the presence of mind to achieve economic complexity; a situation where our goods are sophisticated and command good value,” he further asserted.