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Friday, 30 December 2011 19:00

China's Investment Hits U.S.$6.1 Billion

By Eromosele Abiodun

NIGERIA, December 30, 2011 (This Day) - The exponential growth rate of Chinese economic links with Africa has reached a new height as report by Oxford Business Group (OBG) has revealed that China accounts for roughly 25 per cent of Nigeria's inbound Foreign Direct Investment (FDI), equivalent to roughly $6.1billion (N988.2 billion).


Oxford Business Group is a global publishing and consultancy company producing annual investment and economic reports on more than 30 countries. Also, recent data released by the National Bureau of Statistics (NBS), showed that China was the country's second largest source of imports for the first six months of 2011.


"About N737 billion ($4.57 billion) of goods entered Nigeria from the Asian giant during the first two quarters of the year, equivalent to about 11 per cent of total imports. Exports to China for the same period were smaller, at N390 billion ($2.42 billion), or about 6 per cent of the total. Nonetheless, China was overall the second-largest trade partner for Nigeria during the first two quarters of 2011, second only to the United States," NBS reported.


Though the NBS did not report individual categories of imports by country, then Minister of Commerce and Industry, Mr. Jubril Martins Kuye, had last year told newsmen that Nigeria primarily imports mechanical, electronic, textile and light industrial products from China, while goods flowing in the opposite direction include agricultural products, minerals and textile raw materials.


OBG however, noted that although the country might run a sizeable trade deficit with China, overall she generally maintained a surplus thanks to its oil exports.


According to OBG, "In 2010 the country's imports amounted to N6.65 trillion ($41.23 billion), while exports hit N13trillion ($80.6 billion), generating a surplus of N6.36 trillion ($39.43 billion). For the first six months of 2011, exports were about on pace with the 2010 figure, amounting to N6.79 trillion ($42.1 billion). However, imports have already reached N6.43 trillion ($39.87 billion), nearly equal to the full-year figure for 2010.


"The reason behind the surplus comes from the fact that the vast majority - or more than 70 per cent - of Nigeria's outbound trade is crude oil, with China one of the biggest customers. However, Beijing has been pouring capital into other sectors, in support of Nigeria's economic diversification policy, with some visible results."


Minister of Trade and Investment, Mr. Olusegun Aganga in November travelled to China and met with China's vice minister of commerce, Fu Ziying, and Weng Jieming, the director of Chongqing Liangjing New Area, a 1205-sq-km sub-provincial area in south-west China dedicated to industry, manufacturing and logistics.


Jieming had told Aganga that, in addition to encouraging local companies to export to Nigeria, the government would also "support the companies, especially in the motorcycle and automobiles industry, to make direct investments in Nigeria for local production."


During his meeting with Ziying, Aganga said that establishing a manufacturing zone for Chinese products in the country, would help correct the trade imbalance that exists between the two countries, with producers able to benefit from the availability of raw materials and a ready market for Chinese goods.


"The Chinese are already involved in the Lekki Free Trade Zone (FTZ), which is being developed on a 165-sq-km site located to the southeast of the city of Lagos. Lekki FTZ is being developed by a joint venture between CCECC-BEYOND International Investment and Development Company (a consortium of several Chinese firms) and various Nigerian interests, including the Lagos state government, and aims to attract foreign manufacturers who target both the domestic and regional markets.


"However, China's involvement in Nigeria, as in the rest of Africa, is not without its problems. Agreements between the two countries have been criticised for not being transparent and for not including sufficient detail. Several of China's announcements for plans to build railway systems, power plants and refineries in Nigeria have not yet come to fruition, "it stated.


OBG added that an increase in Chinese FDI would go some way towards creating the manufacturing base that Nigeria is keen to establish, and would ostensibly help address the trade imbalance between the two countries.


"Nigeria, like many countries with substantial oil production, has in the past been able to rely on its hydrocarbons sector to finance the government's activities and generate foreign reserves. However, as the government shifts its focus to creating jobs, investment in other sectors will be important going forward," OBG said. (END)


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