The Political Economy of Chinese and Indian Trade,Aid and Investments in Nigeria: A Comparative Analysis

Abstract

This article provides a comparative analysis of the political economy of Chinese and Indian economic engagement strategies in Nigeria. It argues that although China is becoming increasingly prominent in Nigeria partly because of its state-led economic engagement strategy, India’s private sector-led engagement strategy chimes with Nigeria’s neoliberal economic reforms. However, the article maintains even though both Chinese and Indian strategies are not mutually exclusive to either of the two giants in the pursuit of their interests on the continent, African leaders and policymakers need to develop more strategic engagement plans in their dealings with China and India.

Keywords

China India Nigeria trade aid investments political economy

Introduction

During the past two and half decades, China and India have increased their economic activities in Africa (Broadman, 2007, 2008). In particular, the aid, trade and investments flows between African countries and the two Asian giants have witnessed significant increments in recent years. But the increase in economic relations has sparked controversies between two broad camps of scholars and analysts: optimists/proponents and sceptics/opponents. While optimists celebrate the increase in economic relations as a positive development for African countries, sceptics argue the relationship represents a (re)colonisation of the continent. Although the literature on China and India in Africa is now replete with contributions from members of both camps, much of the literature concentrates on Chinese activities on the continent (see for instance Alden, 2007; Alden et al., 2008; Harniet-Sievers et al., 2010; Taylor 2006, 2009; Wang 2007). The role of India unfortunately has received less attention (Taylor, 2012) and attempts to offer comparative analysis on the subject are few (Cheru and Obi, 2010; Goldstein et al., 2006). To this end, this article seeks to contribute to the comparative literature on China and India in Africa by providing a nuanced analysis of the strategies adopted by both countries in their engagements on the continent. It specifically focuses on their aid, trade and investment relations in Nigeria.

To be sure, the identified strategies relate to China’s state-led capitalism and India’s private sector-led liberal internationalism. The article addresses the question: how do the adopted strategies of China and India advance/impede their aid, trade and investment activities in Nigeria? While the article contains descriptive quantitative data of the volumes of Chinese and Indian aid, trade and investments in Nigeria, it mainly utilises a qualitative approach in its analysis using mainly secondary data sourced from publications in the literature on the subject. This allows for more reflective and interpretive analysis of the numbers and the political and economic power plays behind them.

On one hand, the article argues that despite some mistakes, Chinese state-led capitalist strategy has so far provided Chinese companies and businesses in Nigeria some economic advantage over their Indian counterparts. This is due, amongst other things, to financial support from institutions like the China Export Import Bank (Exim Bank) and political support from the Chinese government. On the other hand, India’s private sector-led engagement strategy so far enables it to dexterously navigate the murky waters of Nigeria’s political economy in an attempt to take advantage of ongoing market-based economic reforms in Nigeria. Nevertheless, the article concurs with Cheru and Obi (2011: 91) that ‘the differences between Chinese and Indian strategies of engagement are more of form than intent, underscoring the primacy of the competing national interests that do not completely foreclose mutually reinforcing strategies’. The article proceeds in three sections. The first section discusses the rise of the two Asian giants within the context of the global political economy and their relations with Africa in the post-Cold War era. The second section focuses on the trade component of the engagements between Nigeria and the two Asian countries. The third section explains the aid and investment aspects of the engagements. The article concludes that there is a need for African countries to develop strategic engagement plans in order to meaningfully benefit from their engagements with both India and China.

The political economy of China and India in Africa: rhetoric and realities

It is now widely acknowledged that the rise of China and India in the past three decades makes them major players on the global economic and political scene (Engardio, 2007; Modi, 2011). As Lum et al., (2009) observe about the rise of China, its presence across the globe has been bolstered because of its increasing economic and financial power. Similarly, in the case of India, Wulf (2013) notes the rise of India on the global stage is something successive Indian governments are eager to leverage in their bid to improve India’s economic and political relations globally. The two Asian giants are effectively utilising their political and economic strengths to enhance their position across the world. Moreover, to attract more friends globally, both countries are using their ‘soft power’ (Huiyun 2009; Hunter 2009; Taylor 2012). While the global rise of China and India is no longer in doubt, their presence has been remarkably visible on the African continent, as they now compete not only with each other, but also with other major Western powers for Africa’s natural resources and markets. Although African responses to the involvement of the Asian giants remains mixed, the increasing activities of Chinese and Indian engagements on the African continent attests to the positive approval of their presence (Cheru and Obi, 2010; Harniet-Sievers et al., 2010; Manji and Marks, 2007).

China in Africa

Within the purview of its renewed engagements in Africa, China has moved away from the communist-inspired ideological engagements of the Cold War era. Despite communism’s strong influence on China’s foray into Africa in the 1940s (see for instance Hevi 1967; Larkin 1971; Ogunsanwo, 1974), the days when China encouraged projects like the building of the Tan-Zam railway to foster communism are now considered to effectively over. In recent years, a new era of strategic engagements and partnerships has emerged as part of Chinese ‘going out’ policy. In order to promote its economic and political interests on the continent since the end of the Cold War, China utilises a pragmatic external engagement policy epitomised by state-backed capitalist expansion. But this strategy is not without its critics, some of whom argue it negatively affects Africa’s development. A mixture of ‘fact and fiction’ about Chinese engagements in Africa (Downs, 2009) often generates controversies amongst scholars and observers (Sautman and Hairong 2009: 732).

Beyond the controversies, deciphering Chinese engagements in Africa without paying attention to the rhetoric used in promoting them further obfuscates understanding China’s strategy on the continent. In this regard, China’s ‘five principles of peaceful coexistence’ as conceived in the 1950s still serve as a template for framing Chinese rhetoric in Africa (Alden and Alves, 2008). The five principles are non-interference in other countries’ internal affairs, peaceful coexistence with other states, equality and mutual respect for others, mutual non-aggression and respect for others territorial integrity. Admittedly, these five principles have sometimes been breached since their conceptualisation in the mid-1950s (Strauss, 2009: 777). Yet, they continue to feature prominently in framing Chinese diplomatic rhetoric on the African continent today (Alden and Hughes, 2009; Strauss and Saavedra, 2009).

The principles are used to emphasise what many Chinese officials consider a ‘win–win’ and ‘no-strings-attached’ cooperative engagement strategy between African countries and China. Notably, the ‘win–win’ mantra seeks to reassure Africans of the non-zero sum nature of Chinese engagements on the continent. This reassurance occasionally borders on Chinese responses to Western critics of China’s engagements in Africa; distinguishing its engagements in Africa from those of Western powers is a priority for the Chinese government. China’s claim of a ‘no-strings-attached’, ‘win–win’ module of engagement with many African countries is a common rhetoric. As a result, in addition to serving as a platform for announcing new aid, trade and investment plans for Africa, the tri-annual meetings of the Forum of China–Africa Cooperation (FOCAC) also serves the purpose of reinforcing the ‘no strings attached’, ‘win–win’ rhetoric in relation to the five principles.

In reality, the effects of the exponential increases in China–Africa trade, aid and investments are noticeable in increased revenues for African states and higher prices for African goods and commodities. China’s rising demands for minerals and commodities from Africa is partly responsible for increases in African countries economic growth rates so far witnessed in the past decade (Broadman, 2008). The economic growth rates on the continent in recent years have been around 5–6%. In concrete terms, as at 1999 the value of China–Africa trade stood at approximately $2 billion dollars, it increased to $29.6 billion in 2004 and was at $39.7 billion in 2005 (Taylor, 2006: 937). By 2010, it had surpassed the $100 billion dollar target the Chinese officials promised during the 2006 FOCAC meeting in Beijing. Although the trade is mostly in raw materials and agricultural products, the opportunities provided for less developed African countries, especially those whose commodities fall under the tariff exemption that China offers, have proven to be an elixir for some of these countries.

Furthermore, oil-producing countries such as Angola, Sudan and Nigeria enjoy particular advantages due to China’s high demand for energy resources. Despite not importing up to 1% of its oil supplies from Africa in 1989, 30% of Chinese oil imports in 2009 came from Africa (Cao and Bluth, 2013: 384). The imperative of meeting its energy needs, occasioned by its domestic industrial and consumer demands, as well as the necessity to keep pace with its own economic development and growth, makes it almost certain that the volume of global oil exports to China will increase to over 20% by 2020 (Trinh et al., 2006: 7). Africa’s oil producers are likely to increase their current shares of Chinese oil imports. Yet, with the exception of Angola and Sudan where Chinese oil firms are very much in business, gaining access to the oil sector in Nigeria has proven to be challenging. As explained later in this article, this is partly due to the presence of established Western multinational oil companies.

In terms of African imports from China, most African countries import manufactured products. These range from machinery to finished consumer goods at cheaper and affordable prices. Chinese imports nonetheless occasionally produce tenuous trade relationships between China and many African countries. The major contention often revolves around the importation of substandard goods from China into the continent. The negative impacts of such imports, and the volume with which they come, have destroyed local capacity in the production of items such as textiles where they once existed. The 2006 closure of Chinatown in Lagos, Nigeria, where Chinese nationals sell most goods from China is one instance of such tenuous relationships. Another instance is the suspension of imports of textiles from China into South Africa in the mid-2000s.

Similarly, the realities of Chinese aid and investments have had their impact on the continent. For instance, in infrastructural development, Chinese aid and investments have been quite remarkable in fixing Africa’s infrastructure deficit. Roads are being built, railroads constructed, schools, hospitals and power (electricity) projects now dot the continent. The biggest beneficiaries with over 70% share are Nigeria, Angola, Sudan and Ethiopia (Foster et al., 2008: 19–22). Intuitively, the first three are oil producers and their ability to strike the now famous ‘oil-for-infrastructure’ deals with China is a major contributor in this regard (Asche and Schuller, 2008: 36). Nevertheless, what constitutes ‘pure’ Chinese aid and what represents Chinese investments in Africa is quite blurred given the interwoven nature of the two. Distinguishing between what constitutes Chinese aid as opposed to investment can be a Herculean task (Wang and Bio-Tchane, 2008: 45). Estimates of the exact figures of Chinese aid and investments in Africa are hard to come by, as the Chinese government hardly discloses its disbursements (Brautigam, 1998, 2009). Chinese aid figures, according to Brautigam (2009: 12), are ‘state secrets … There are no official figures on aid allocations to individual countries or regions, no breakdown by sector or purpose.’

Consequently, Chinese aid and investment figures are mostly based on approximations of various figures gotten from sources that are sometimes unverified (Lum et al., 2009). As Lum et al., (2009: 1) note, Chinese economic assistance can appear in a combination of ways that combine government-sponsored investments, debt relief and cancellation, concessionary loans and grants, and in-kind aid. These may also embed the cost of economic exchanges and educational training programmes as well as scholarships (Van De Looy, 2006: 7). Overall, it is well acknowledged that Africa’s share of Chinese aid and investment has increased. Also noteworthy is the diversified nature of Chinese investments. They cover a broad range of areas from infrastructure development to telecommunications, mining, oil and gas, light manufacturing, construction and so on.

India in Africa

India has a long history in Africa. Well before Mahatma Gandhi made his trip to South Africa in the late 1800s, Indian traders have always exchanged commodities with Africans. But the colonial interlude expanded the involvement of Indians on the continent. Thus, the role of British colonialism in facilitating such migration between its colonies cannot be overemphasised. Today, it is estimated that almost 8% of People of Indian Origin (PIO) globally are residents and/or citizens of African countries (Taylor, 2012: 781). The fact that African citizens of Indian ancestry have successfully settled in different parts of Africa, in spite of persecutions they once faced in the hands of tyrants such as the former Ugandan despot President Idi Amin, attests partly to the strong historical links between India and Africa. Indeed, the inspirations drawn from Indian independence from the British in 1947 (Taylor, 2012: 781) and the subsequent leadership role assumed by India in the Non-Aligned Movement (NAM) after World War II (Harshe, 2010: 348) encouraged decolonisation struggles in many African countries. The rhetorical arguments of being a former European colony and one of the first to gain independence from colonial rule have been used to the advantage of India in its engagements in Africa in recent years.

Like China’s rise, the rise of India as a major power in the global south has far-reaching effects on global politics and economics. Dating back to the active days of the NAM, India’s approach to global affairs reflects its status as the world’s largest democratic state (Banik, 2011: 90). Its prominent role in NAM allows it to sometimes serve as the ‘voice’ of developing countries in international relations especially on north–south issues. Its rise in the post-Cold War era has forced a redefinition and reconsideration of what constitutes Indian interests in global political and economic relations. Moreover, how India goes about pursuing such interests has also received more realistic assessments and considerations with respect to its renewed foray into Africa since the early 1990s.

India’s vigorous attempts to further its presence in Africa in the post-Cold War era reflects the imperative of securing unhindered access to Africa’s resources for its own economic growth and development. It is important to note that despite its rising status as an economic power, India, like China and many other developing countries, is still a place where there is a lot to be done to reduce endemic poverty and socioeconomic underdevelopment. In the aftermath of India’s neoliberal reforms and the adoption of its neoliberal capitalist-induced foreign economic policies in the late 1980s and early 1990s, market forces, more than the state, are responsible for informing and directing India’s engagement policies. While successive Indian governments play a residual role in encouraging the expansion of private Indian industries and companies abroad, they nevertheless keep a close eye on the latters’ activities.

In general terms, there has been a gradual and steady upsurge in trade between India and Africa since the early 1990s. In 1991 for instance, the value of trade was around $967 million, it increased to $25 billion in 2007–2008 and was raised to around $40 billion in 2008–2009, it was between $45 and $53 billion in 2010–2011, and is projected to reach $75 billion by 2015 (Harshe 2010: 355; Taylor, 2012: 789). The patterns of trade involve Africa’s export of primary commodities such as oil, minerals such as gold, iron ore and metal, as well as agricultural products. Manufactured fabrics and textiles dominate imports, machinery, pharmaceuticals and other finished products from India (Broadman, 2008: 97).

Indian aid to Africa has also witnessed increases lately. But the lack of a central agency responsible for aid disbursement makes it challenging to ascertain the exact amounts that have been disbursed to Africa (Taylor, 2012: 786). The 2011 India–Africa summit that brought Indian and African leaders together to improve their relations ended with India promising to provide over $700 million in aid for Africa (Taylor, 2012: 786). Indian aid has contributed to building the capacity of Africans in the areas of information technology and education (Harshe, 2010: 357). These areas also occupy a special place in the investments of India in Africa. Several Indian Information and Communication Technology (ICT) companies and education services institutions are active on the continent.

Between 1995 and 2004, Africa accounted for 16% of Indian FDI and the value of the continent’s share in the same period is estimated to be $2.6 billion (Broadman, 2007: 97). Even though some observers have expressed views about the size of Indian FDI in Africa, owing to its concentration in Mauritius that serves as a transit country for Indian FDI to other parts of the world, estimates vary on India’s actual FDI on the continent (Taylor, 2012: 789; Vines and Sidiropolous, 2008: 26). Nevertheless, with Indian oil companies such as the oil and natural gas company (ONGC) Videsh gradually making its way into the oil industry in Nigeria, Angola and Sudan, the value of Indian FDI in Africa is likely to rise significantly in the coming years. Yet, how India, as well as China, engages individual African countries depends on what is at stake. This invariably requires some high-level engagements and immersion in the domestic political economy of these countries.

The complex nature of the interactions between politics and economics in African countries create a huge challenge to engaging with governments and private businesses on the continent. In the case of Nigeria, the presence of oil and the state’s dependence on it raises the stake for different domestic and international state and non-state actors and institutions (Amundsen, 2012: 1). Unsurprisingly, Nigeria’s political economy partly reflects the interplay of various factions. As Amuwo (2010: 430) explains,

[M]embers of different factions – military-commercial, bureaucratic, political, intellectual, cultural, chiefly estate and so on – smart and lucky enough to access and stay in power for only a couple of years are assured handsome and rounded dividends from the use of the state as a private resource.

Since the return of democratic rule in 1999, Nigeria has been moving more in the direction of neoliberal market economics with an emphasis on private sector-led growth. The economic reforms that began in 1986 with the introduction of a Structural Adjustment Programme under the aegis of the World Bank and International Monetary Fund (IMF) have continued with successive national governments (Adejumobi, 2011). Thus, privatisation and liberalisation policies have been prominent in the country. Decision-making on the (re)direction of an oil dependent economy towards a seemingly elusive quest for diversification continues to be made mainly by the federal government, its institutions and actors (Eme and Onwuka, 2011). However, Nigeria’s political economy reflects the influence of state and non-state actors and institutions at federal, state and local government levels who engage in making crucial trade, aid and investment decisions. As a federal state with 36 sub-national state governments, a federal capital territory, and 774 local governments, engaging various actors and institutions across all levels of government in Nigeria is challenging. The weak capacity of state institutions and their inability to effectively perform their statutory functions create additional difficulties in navigating Nigeria’s political economy landscape (Aiyede, 2009; Uzonwanne, 2013). More so, despite efforts to promote economic growth with the help of the private sector, Nigeria continues to be plagued by economic mismanagement and corruption. In fact, the privatisation process of public enterprises since 1999 has been riddled with allegations of corruption and bribery. This has produced a dent on the integrity of the entire process. Even though potential and actual gains abound in engaging Nigeria as Africa’s most populous country and largest economy, both India and China have been confronted by difficult decisions relating to their trade, aid and investments in Nigeria.

Chinese and Indian trade with Nigeria: some important observations

Trade relations between China and Nigeria commenced more than four decades ago. According to records compiled by Mtembu-Salter (2009: 10), as at 1969, the volume of trade between Nigeria and China was £2.3 million, it increased to £5 million in 1970 and by 1971 when official diplomatic relations commenced, it reached £10.3 million. By 1994, the volume of trade had reached $90 million, increased in 1995 to $210 million, reached $830 million in 2000 and between 2001 and 2008 it grew to $7,268 million (Mtembu-Salter, 2009: 10). Like Angola and Sudan, Nigeria’s main export to China is oil and it imports mostly finished goods.

The lack of diversification of Nigerian exports to China is noteworthy and merits some explanations. The discovery of oil and its status as the state’s main foreign exchange earner since the late 1960s has been a bane to the development of other sectors of the Nigerian economy. Ever since oil and gas became its main export products, Nigeria’s former role as the main exporter of agricultural products such as groundnut, palm oil and cocoa in the late 1950s and early 1960s has gradually eroded. Its manufacturing sector has also suffered great setbacks since the emergence of oil and gas as major export commodities. The manufacturing sector currently contributes less than 4% to the country’s GDP. The much-discussed diversification of the Nigerian economy has not produced any positive results and the export of oil remains the major trade Nigeria engages in with the rest of the world. Notwithstanding the manufacturing fiasco, one of the areas where the country has tried to maintain some modicum of diversified manufacturing export is in the textiles industry. Unfortunately, conflicts with Chinese traders and manufacturers have featured in Nigeria’s attempt to continually keep its textile industry functional; this is chiefly due to the ‘dumping’ of cheap textile imports from China.

In a broad sense, the production of textiles has always been a thriving and lucrative enterprise in West Africa from a historical perspective. Countries such as Nigeria, Ghana, Togo, Benin, Senegal, Cote d’Ivoire and others along the West African coastal corridor, whose societies and citizens have participated actively in the propagation of textile production for centuries, have been forced into a retreat due to cheap Chinese textile imports. In some instances, some West African textile manufacturers have closed their shops and businesses. In response, the Nigerian authorities have reacted angrily to such developments even as various trade unions in Nigeria, not least the Manufacturing Association of Nigeria (MAN), have all called upon the government to take decisive actions against Chinese textile importers and manufacturers.

Early indications of tensions in China–Nigeria trade relations emerged in 2001 when the government of former President Olusegun Obasanjo listed textiles and other clothing products coming mainly from China as contraband goods. These contraband goods were subject to confiscation upon discovery. To the contrary, the influx of textiles from China only increased afterwards. As tensions rose, discussions between Nigerian and Chinese officials failed to reduce the influx of the contraband goods and the Nigerian authorities began raiding Chinese warehouses around the country. In 2003, a Chinese warehouse was sealed owing to the discovery of contraband goods but this did not deter other importers of the contraband. Another raid in 2006, which actually affected a major Chinatown shopping centre in Ojota, Lagos, Nigeria, forced the entire market to be closed for days as Nigerian government officials insisted on applying stiffer punishments for violating importers and traders. To date, the effects of the 2006 closure are still been felt as the place is now considered a ‘ghost town’ by many. The shops are empty and some Chinese traders have relocated back to China or other parts of Nigeria.

The failure to peacefully resolve the impasse over textile imports and exports reveals how frosty Nigeria–China trade relations can be. Unlike South Africa that was able to manage similar conflicts with Chinese traders and importers in 2006, dialogue completely broke down in the Nigerian case. In the case of South Africa, Chinese officials agreed to implement a moratorium on Chinese textile imports for some years so that South African textile manufacturers and traders could find their feet and be prepared for competition in future. But in Nigeria, the response of the Chinese has been to point accusing fingers at Nigerian importers and traders who specialise in smuggling cheap Chinese textiles into Nigeria via unsupervised and porous borders (Mtembu-Salter, 2009: 11). Corrupt Nigerian customs agents have also been identified as been complicit in allowing the import of Chinese textiles. Interestingly, some of the banned ‘made-in-China’ textiles sometimes come with designs and patterns usually used by their West African counterparts. In such circumstances, Nigerian authorities and textile manufacturers accuse their Chinese counterparts of colluding to destroy the Nigerian textile industry. However, regardless of the controversy over textiles, China–Nigeria trade continues to grow and the export of some Nigerian commodities such as cassava have increased. More so, many Nigeria traders now live and work in the Chinese city of Guangzhou, a city fast becoming the trade hub for many Africans and Chinese. This is likely to encourage more trade relations between the two countries on a people-to-people basis.

With respect to trade relations between Nigeria and India, it seemed to have followed an evolutionary path and in 2013 India became Nigeria’s topmost trading partner. The presence of Indian businesses in Nigerian cities such as Kano, Kaduna and Lagos pre-date Nigeria’s independence in 1960. Although the trade between the two countries have always existed, on the eve of Nigeria’s transition to democracy in 1998/1999, the value of trade totalled $1425.82 million and increased to $2916.21 million in 2002–2003 (Kura, 2009: 21). In the early 1960s, Indian imports from Nigeria comprised oil and textiles and India enjoyed a trade surplus with Nigeria. But since the oil boom of the 1970s, the trade surplus has been in favour of Nigeria; between 22 and 25% of Indian oil requirements are from Nigeria (Vasudevan, 2010: 3–4). Apart from oil, Nigeria exports items such as wood, pearls, plastics and textiles to India and imports mainly pharmaceuticals (Vasudevan, 2010: 4). Unlike its dealings with China in non-oil products such as textiles, Nigeria’s trade engagement with India has so far remained peaceful.

The political economy of Nigeria’s external trade with China and India shows that the options for Nigerian politicians and policymakers in effectively deciding the direction of trade are not much. The lack of a strategic trade policy is a major bane in this regard. The country’s overdependence on oil makes it imperative to always take oil to the market as a main commodity. As it stands, even if diversification of the economy will take place, revenues from oil will be instrumental in facilitating such redirections, provided the necessary policies are put in place and corruption is reduced in the process. But given Nigeria’s adopted neoliberal reforms, such diversification may take a while to materialise. This is because it appears unlikely that any real ‘developmental’ efforts on the part of the Nigerian state, similar to anything China or even India did to manage their own economic diversification through state-directed development, will take place anytime soon.

Notably, crucial to understanding Chinese and Indian trade with Nigeria is the role of their trade-supporting institutions. In the case of China, the establishment of state-sponsored financial institutions such as China Exim Bank, China Development Bank and the China Export and Credit Insurance Corporation has enhanced China’s trade relations globally. Bolstered by large financial support from the Chinese government, these institutions have facilitated the trade relations between Nigeria and China through their loans and grants for Chinese state-owned and private businesses. Similarly, but to a far lesser degree, India’s attempt to extend lines of credit to its companies through its own Exim Bank has not influenced Nigeria–India trade significantly. Not even the India Focus Africa programme, launched in 2002 to encourage trade relations amongst others things (Harshe, 2010: 355), has been quite successful compared to any of the Chinese institutions. Nonetheless, considering India is now Nigeria’s number one trading partner due mainly to increases in Indian oil imports from Nigeria, it can safely be suggested that India–Nigeria trade will be enhanced if lines of credit are extended to companies, traders and manufactures involved in facilitating trade between the two countries.

Navigating murky waters: Chinese and Indian aid and investments in Nigeria

After the return to democracy in 1999, the administration of President Olusegun Obasanjo inherited a Nigeria with dilapidated infrastructure, high youth unemployment, systemic corruption, huge national debt and a private sector that mainly lived off the public sector. The situation has not improved in many aspects: poverty remains high at over 60%, life expectancy is low and level of illiteracy is still high. Crime and insecurity across the country and terrorism in the northern parts continue to be challenges that Nigerians confront daily. Finding solutions to these problems has been quite difficult for various stakeholders. Government officials therefore consider the increasing relations between Nigeria, China and India as an opportunity for solving some of Nigeria’s socioeconomic problems, not least through the creation of job opportunities for the teeming number of unemployed youths in the country. To be precise, although revenues accruing from the sale of various export commodities allow the government to stay afloat, additional resources are needed for rapid national development. Aid and investment from China and India are important sources for financing socioeconomic development in Nigeria. Yet, in providing aid and investment to Nigeria, caution needs to be applied in order to avoid potentially debilitating and catastrophic mistakes. The politically turbulent years of President Obasanjo’s administration (1999–2007) witnessed twists and turns in the aid and investment relations between China, India and Nigeria. As earlier mentioned in the case of China, delineating Chinese aid and investment into clearly distinguishable parts can be quite onerous in real terms due to the interwoven nature of aid and investments in Chinese state-led capitalist expansion strategies. China uses its aid to facilitate investments in many African countries and Nigeria has not been an exception. Considering Nigeria’s enormous socioeconomic challenges, Chinese companies have been able to make some in-roads into the country with aid from the Chinese government. Although Chinese companies are visible in almost all sectors in Nigeria, their presence is greatest in the construction, telecommunications and oil sectors. Nigeria is one of the major beneficiaries of China’s infrastructural investments in Africa (Foster et al., 2008: 20). In the areas of building hydro and gas-powered stations, highways and railroads, Chinese investments are rising. For instance, the China Civil Engineering Construction Corporation (CCECC) has won many contracts in Nigeria. This includes the rehabilitation of some existing railroads and the construction of the $50.5 million 5000 housing units used for the eighth all-African games held in Abuja, Nigeria in 2003 (Mtembu-Salter, 2009: 16).

In addition, given the Chinese preference for government-to-government or state-to-state bilateral public sector engagements, Chinese companies have been supported by Beijing to bid for national and sub-national government contracts in Nigeria. The contract awarded to CCECC by the Lagos state government in Nigeria to build the Lekki Free Trade Zone is a good example (Mtembu-Salter, 2009: 16). Moreover, Nigeria’s status as a major oil producer on the one hand, and China’s desire to meet its own domestic energy needs on the other, makes getting into the Nigeria oil industry a priority target for the Chinese. But utilising Chinese aid to enhance investments in Nigeria’s oil industry has not entirely produced the desired results. In fact, if investment in the oil sector is considered the ‘holy grail’ for China in Nigeria, some miles still need to be covered before China has a strong footing in the Nigerian oil industry. Not even the much discussed and somewhat celebrated ‘oil-for-infrastructure’ approach of China in Africa has been able to deliver significant parts of the Nigerian oil sector to Chinese oil companies. China’s ‘oil-for-infrastructure’ project signed with President Obasanjo during his second term in office (2003–2007) entailed that China provides $2.5 billion for the rehabilitation of the Lagos to Kano railway road. This was supposed to be in exchange for four oil blocs with proven reserves given to the China National Offshore Oil Corporation (CNOOC). But immediately after the expiration of Obasanjo’s tenure as president in 2007, the deal fell apart amidst controversies over numerous irregularities in the negotiations (Vines et al., 2009: 21). The disagreement with the Chinese also bordered on the fuzzy amount of loan components and interests to be paid on the deal (Downs, 2009: 54). President Umaru Yaradua, who succeeded Obasanjo, suspended the deal a few weeks after been sworn in as president in 2007. The deal was subsequently renegotiated and split into bits for the construction of parts of the railroad. The oil blocs were withdrawn and other offers made.

In their effort to enter Nigeria’s oil industry where Western multinational oil companies representing the ‘seven sisters’ dominate (see Sampson, 1993), Chinese companies did not envisage any situation that could adversely affect their entrance. Indeed, by the time the Chinese companies realised what had gone wrong with their hasty approach at acquiring oil blocs in Nigeria, powerful Western companies and their local elite partners, both in and out of government, had been provoked. Moreso, the period of hasty negotiations and fuzzy terms of agreement by the Chinese in the mid- to late 2000s coincided with the end of oil concession licences and contracts hitherto held by the major Western oil companies. Local power elites and the multinational oil companies interpreted the oil-for-infrastructure deal as an attempt by the former president to redistribute oil contracts in favour of Chinese companies.

Also around this time, Western multinational oil companies and their local allies had expressed concerns about the implicit redistributive aspects of Nigeria’s proposed Petroleum Industry Bill during the administration of the former president. Rather unsurprisingly, even until today, the Bill remains to be passed by the national parliament. This is despite arguments in favour of its transformative elements with respect to promoting transparency and accountability in Nigeria’s opaque oil industry. Concisely, the vicissitudes of Nigeria’s elite politics and the influence of the oil companies on Nigerian politicians and policymakers have made it problematic for Chinese companies to find a strong footing in the Nigerian oil industry. A reality that the Chinese government now appears to recognise, as it seems to take a more gradual approach to its engagements and entrance into Nigeria.

Equally important, the ‘privatisation of politics and power’ under President Obasanjo during the eight years of his administration (1991–2007) created a lot of turbulence in Nigerian politics (Adejumobi, 2011: 3). Alliances were formed for and against him and some of those who appeared to have been favoured under his administration were up against those against him. This made it even more difficult for the Chinese to successfully find a way to enter the Nigerian oil industry with the former president’s support. The latter’s widely reported attempt to elongate his constitutionally circumscribed two-term limit as president to three terms raised tensions within the Nigerian polity in the build up to the 2007 general elections.

Perhaps if the Nigerian parliament had not voted against the third term ambition of the former president, China might have ‘surreptitiously’ gained access into Nigeria’s oil industry with his support. This in itself might have created further problems for the Chinese in future once he left office. The setback suffered by CNOOC as a result of the revoked ‘oil-for-infrastructure’ project notwithstanding, Chinese oil companies such as the China National Petroleum Company (CNPC) and China Petrochemical Corporation (Sinopec) are now making gradual progress. Indeed, Sinopec’s $7.22 billion purchase of a Canadian oil firm, Addax, in 2009 is sometimes considered a possible model for Asian companies to get into the Nigerian/African oil markets (Vines et al., 2009: 1). This, according to Vines et al. (2009), means purchasing existing companies and operations rather than bidding for new oil blocs.

Away from the oil sector, the telecommunications sector in Nigeria has witnessed some Chinese investments. Chinese companies such as Huawei and Zhong Xing Telecommunications Equipment Company (ZTE) have made their presence felt by engaging in a wide range of activities relating to the expansion of Nigeria’s telecommunications services. Huawei has collaborated with GV Telecoms/Prestel in a deal worth $250 million for the expansion of its activities while the China Development Bank has provided $20 million to support Reliance Telecommunications Limited through Huawei (Baah and Jauch, 2009). Nigeria also solicited the assistance of China in launching a satellite into orbit. The launch of NIGCOMSAT-1R from China in May 2007 was applauded as a success, but the satellite disappeared into space in November 2008, embarrassing both Chinese and Nigerian officials in the process. It was, however, replaced soon afterwards (Mtembu-Salter, 2009: 18). Nevertheless, the entrance of China into Nigeria’s telecommunications arena has been positive.

In the case of India, Indian aid and investments in Africa tend to go into capacity building of Africans and Nigeria has been a beneficiary of many training programmes, including security-related training of military and police personnel. In the ICT sector, India supports the training of ICT experts and Indian ICT companies continue to expand their franchise in Nigeria. More than 150,000 Nigerians have received training from such franchises since 1990 (Vasudevan, 2009: 5). In addition, considering Nigeria and India have vibrant film industries (Nollywood and Bollywood respectively), investments have gradually begun to rise in the movie sector as well (Harshe, 2010: 356). Beyond the telecommunications and entertainment sectors, Indian companies, like those of China, have emerged in the construction, power and pharmaceutical sectors. However, it is in the oil sector that India, unlike China, has applied a meticulous approach and made informed decisions without running into problems with the Nigerian authorities.

From India’s perspective, efforts geared towards securing reliable and affordable access to oil are necessary for India’s economic and industrial progress. Considering its ‘late comer’ status to African oil markets, securing access in Nigeria’s oil industry is crucial for India. For this reason, Indian oil companies have signed agreements with the Nigerian National Petroleum Corporation (NNPC) for the import of oil (Beri, 2010: 905). Indian oil companies such as ONGC Videsh have successfully won contracts in oil licensing and prospecting in Nigeria. India’s demand for Nigerian oil is high and Nigeria supplies 10% of India’s global imports. It is also a major beneficiary of ONGC Videsh’s foreign investments (Vines and Sidoropolous, 2008: 26). Apart from ONGC Videsh, other leading Indian companies such as the ONGC Mittal Energy Limited, a joint venture company made up of ONGC Videsh and Mittal Steel Limited, the Gas Authority of India limited (Gail), and Indian Oil Corporation (IOC), have all shown interest in investing heavily in Nigeria. Yet, despite their keen interest in Nigeria, successive Indian governments and oil companies have been very careful in entering the Nigerian oil and gas sector without due considerations of the possible setbacks that can arise from unscrutinised purchases.

A case that proves their meticulous approach is ONGC Videsh’s 2005 successful bid to purchase a 45% stake worth $2 billion in South Atlantic Petroleum Limited, a company owned by a former Nigerian army general (Vasudevan, 2010: 6). Despite its successful bid, the Indian government blocked the deal, citing the unprofitable nature of the agreement. This quick intervention by the Indian government some observers maintain saved India from what could have become a major error. However, the dexterous attributes of Indian engagements go beyond the perceptive decisions in cases such as the oil deal cancellation. Indian oil companies have shown their capabilities in taking part in Nigeria’s oil exploration activities and have made progress in the downstream sector. In all, Indian aid and investments in Nigeria have been used to acquire greater access into the Nigerian economy and Indian businesses continue to thrive in Nigeria. The purchase of Zain Nigeria by the Bharti Airtel Limited of India puts Indian telecommunication investments ahead of those of China in Nigeria. But more importantly, the neoliberal economic reforms the Nigerian government is pursuing avails Indian businesses and individuals the opportunities to invest in Nigeria beyond the oil sector. Whether or not these investments will help cure some of Nigeria’s numerous socioeconomic maladies in the near future remains to be seen.

Conclusion

From the discussions above, it is clear that both China and India are rising and making their impact felt globally. The impact of their rise is particularly been felt on the African continent where the scramble for access to raw materials and investment opportunities continue to illustrate the importance of Africa to the economic equations of the two Asian giants. Gaining access into the continent has been facilitated with the tacit and explicit combination of rhetoric and reality in their engagements with individual African countries and the continent as a whole. Interestingly, while the strength of their engagements varies across the continent, the patterns and forms of their engagements have so far produced different results, with China maintaining the upper hand overall. However, similarities still exist in their strategies. For instance, the FOCAC and the India-Africa Forum Summit are used as avenues for coordinating Chinese and Indian Africa policies and programmes respectively (Anshan and April, 2013; Taylor, 2012). The FOCAC meetings that began in 2000 in Beijing, China, have subsequently been held in Addis Ababa, Ethiopia in 2003, Beijing in 2006, Sharm el-Sheik, Egypt in 2009, Beijing in 2012. And Johannesburg, South Africa in 2015 in South Africa. Likewise, India also held the first, second, and third India-Africa Forum Summits in 2008 in New Delhi, India, 2011 in Addis Ababa, Ethiopia, and 2015 in New Delhi, India.

Furthermore, the establishment of the Chinese and Indian Exim Banks have aided the increases in the trade, aid and investment engagements between China, India and Africa. The role of the Chinese Exim Bank has been very influential in supporting Chinese businesses and companies on the continent. The establishment of the Indian Exim Bank was done partly to facilitate trade and investment between India and Africa, but it has so far not matched that of China. This is despite the fact that in the five years leading up to 2008, India extended approximately $2 billion to eight African countries (Vines and Sidiropolous, 2008: 26)

Regardless of their successes so far on the continent, navigating through the murky waters of African politics and complex economic layouts has not been an easy ride for the Asian giants; mistakes have been made, lessons learnt and challenges remain. Nigeria has arguably been a learning field for China and India in Africa. The challenges involved in engaging complex and divided societies such as Nigeria are no doubt enormous. The increasing presence of China and India in Africa has the potential of providing the opportunities for African politicians and policymakers to utilise the resources the Asian giants can provide to develop the continent. But in the absence of strategic engagement plans in many African countries and sectors for engaging the Asian giants, many African countries may not get what they really need. Quite tellingly, as the former Governor of the Central Bank of Nigeria and current Emir of Kano, Sanusi Lamido Sanusi, expressed in an article in the Financial Times on 11 March 2013, ‘Africa must get real with China’. Need anyone add India as well?

Footnotes

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

Author biography

Olabanji Akinola is a PhD candidate in Political Science and International Development Studies at the University of Guelph, Ontario, Canada. His research interests revolve around African politics, development studies, international relations, governance and social policy.

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