Xi Jinping, Chinese President |
Notwithstanding
the purported benefits of the trip given by the State House, the full list,
that would have otherwise formed a part of the communiqué, would wait till the
end of May for the conclusions of the technical committees which were directed
by Buhari to thrash out the new joint Nigeria/China rail, power, manufacturing,
agricultural and solid mineral projects. Buhari’s visit was hatched during the
70th Session of the UN General Assembly in New York in September 2015 when
Presidents Muhammadu Buhari and Xi Jinping met. The six-month intervening
period before the trip was enough for the relevant officials on both sides to negotiate
beforehand the details of the projects in order to make the agreements
available for formal signing to highlight the visit.
Buhari in
China bemoaned the bilateral trade imbalance which leaves China with 80 per
cent of the total trade volume. Ruefully, the factors responsible for the
situation are of the Federal Government’s doing. Firstly, some Nigerian
agencies wittingly laid the foundation for the trade imbalance and
de-industrialisation of the country: they armed China-based firms (as in other
Asian countries) with Nigerian product specifications and licensed them to
manufacture final products for the Nigerian market. Amidst the numerous
constraints, Nigeria-based manufacturers could not compete.
Secondly,
owing to unorthodox and lax access to the available foreign exchange,
unscrupulous elements on both sides made substandard versions of the goods for
export and dumping in Nigeria. And thirdly, treated as a revenue generating arm
rather than the protector of domestic industries, the Nigeria Customs Service
is often a buddy of smugglers and all manner of wreckers of the economy.
As if
unconcerned about the above Nigerian “normal” state of affairs, Buhari in
Beijing merely appealed to the business communities in both countries to reduce
the trade imbalance. Towards that end, he invited Chinese firms to set up
factories in Nigeria and promised that, unlike the failed previous attempts,
his administration would be deliberate in pursuing import substitution
industrialisation policy. By contrast, the Chinese, intent on continuing to
exploit Nigeria’s mismanagement of its forex receipts, offered a bait in the
form of a currency swap arrangement. Unless well rained, the currency swap
offer will not only reinforce the bilateral trade imbalance but will also leave
the Nigerian economy open for the Chinese to take wholesale possession of.
Alongside the adverse trade position should be placed some unwelcome Chinese
practices, namely, one, Chinese loan-funded joint projects are executed wholly
with imported Chinese workers thereby hampering technological transfer; two,
the Chinese buy up large areas of land with scant regard for neighbouring
residents; and three the Chinese engage in deforestation and harvest protected
tree species in some parts of the country.
Nigerians
need transparently equitable, mutually beneficial and reciprocal economic
relations with China. Buhari should, therefore, go beyond moral suasion.
Firstly, in the areas of trade and industrialisation, there should be
appropriate legislation to reverse the domestic de-industrialisation activities
of agencies such as the National Agency for Food and Drugs Administration and
Control (NAFDAC) and the Standards Organisation of Nigeria (SON). Target dates
should be set for foreign-based firms already licensed by the agencies to
locate manufacturing branches in Nigeria. They should observe labour and
immigration regulations and promote accelerated technological transfer to
Nigerians.
Secondly,
Nigeria and Chinese Customs services should collaborate. The latter should
undertake to check export of substandard products from China to Nigeria.
Thirdly, all imports into the country should be channeled orthodoxly and be
paid for through Nigerian banks. Fourthly, both governments and business
communities in the two countries should commit themselves to actualising an
equitable 50-50 balance in bilateral trade before the renegotiation of the
relevant agreements in the next three years.
With regard
to delivering federal infrastructure projects, China’s record is lacklustre.
Instructively, some beans were spilled when it came to light that the Federal
Government was in default of its counterpart obligations. Buhari pledged to
honour agreements made by previous governments and complete “in the shortest
possible time all joint power, rail, road and aviation projects that will
directly and quickly improve the lives of Nigerians.”
However, his
self-contradiction when he singled out the Mambila Power Project for
actualisation while new infrastructural projects were being discussed is
regrettable. For instance, the Abuja-Kaduna Rail Project, which has been long
overdue, recently featured in the National Assembly. The disclosures included
the absence of a covering memorandum of understanding, the inflation of its
cost by $10 million, and the fact that the last federal administration had paid
out sums of money to the Chinese upon demand without raising any questions.
Were the payments not part of the counterpart obligations? Anyway, are such
opaque goings-on, undocumented details and secrecy surrounding the
Chinese-funded project the motivation for visiting China to seek new joint
projects without prior groundwork? Generally, it will require a shorter period
of time to complete and commission partly executed previous projects for public
use than to embark on new ones with their complement of counterpart
obligations. Therefore, fulfilling the outstanding counterpart obligations on
the previous projects should be accorded priority over any new projects in the
2016 budget or by means of a supplementary budget.
In the
course of the visit, Nigerian and Chinese companies initiated agreements for
various joint investments in Nigeria. In fact, Buhari made provision for an
external loan in the 2016 Budget on account of low foreign interest rates. The
administration is even considering floating yuan-denominated bonds because they
are cheaper than Eurobonds.
A little
economic context is in order. Last March, Nigeria’s inflation rate was 12.8 per
cent as against 2.3 per cent for China. CBN Standing Lending Facility rate was
14 per cent (the apex bank has disclosed at the IMF Headquarters that the rate
will rise) as against China central bank rate of 4.35 per cent. Also, Nigeria’s
unemployment rate is over 23 per cent while the corresponding Chinese rate is
4.05 per cent, the normal attrition rate.
Considering
Nigeria’s currently unutilised banking sector lending potential which tops N70
trillion, the loan requirements could be financed by local banks in the overall
national economic advantage if the level of interest in China prevailed here.
Given that outcome, there would be a host of otherwise viable private sector
investments, all of which cannot be undertaken today. Foreign direct investment
funds (add the various private company loans initialed in China and the $6
billion kept on the shelf in China) are a pittance in relation to the idle
credit potential in Nigeria. It must also be noted that government agrees that
only massive investments in the various sectors of the economy (economic
diversification) will lead to a substantial reduction in the unemployment rate.
So the humongous unutilised bank credit is not a mark of good economic
management. Pertinently, it has been shown incontrovertibly that the country
already attracts and generates more than enough forex to meet the needs of
investments financed using local bank credit. The prospects of forex inflows in
the future are even rosier.
Government
is not unaware that the country’s high inflation, excessively high interest
rates and artificial/unrealistic naira exchange rate (all of which underpin the
high idle bank credit potential) have a single root cause, namely, excessive
fiscal deficits resulting from the improper substitution by the CBN (at the
dictation of successive presidents) of deficit financing for Federation Account
dollar allocations. Therefore, it amounts to fiscal tourism for Buhari to
frequent China and other successful economies to covet the same economic fruits
which the insistently wrong fiscal and ensuing monetary policy preferences of
successive presidents have banished from Nigeria. It is good to go to China but
doing so on fiscal tourism is mere escapism that is incapable of developing the
country. Therefore, Buhari should break forthwith the denial to Nigerians of
the coveted benefits of a sound fiscal deal in their own land. (Guardian)
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