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Nigeria’s Deal With China Will Not Solve Its Problems

By Kira Munk

Li, Buhari

Chinese Premier Li Keqiang (right) meets with Nigerian President Muhammadu Buhari (left) in Beijing, China on April 13, 2016.

At a recent business forum hosted in Beijing, Nigeria secured $6 billion USD worth of investments from the Chinese government. An unfortunate by-product of these plans is that short-term economic gains are being sought out at the expense of long-term parity that could contribute to the stability of the relationship.

With a weakening naira and an impending financial crisis compounded by government budget deficits, this trip comes at a convenient time. These initiatives ultimately feed diversification: a vital strategy in the face of the decline of global oil prices.

The budget deficit for 2016 has ballooned, reaching up to 11 billion naira by some estimations, and while the deals made in China offer some mid-term respite, they don’t solve Nigeria’s current budgetary crisis.

While formerly believed to be a loan to bolster the Nigerian budget, the deal actually includes an array of economic development initiatives funded by China and amounts to over $6 billion USD in total. The role of foreign investment and partnership as a way to develop vital economic areas could increase the potential of the weakening Nigerian economy.

Development Needed in Nigeria’s North

Nonetheless, the underdevelopment of the mostly Muslim North, and resulting alienation of swathes of Nigeria’s population, has been well-documented. This region has not received the infrastructural development and budgetary focus that other areas have enjoyed. The extremist group Boko Haram has preyed upon this environment to garner support and has been, at least until recently, able to operate in a considerable territory.

With this in mind, it is useful to examine who will benefit from development plans with China, most of which seem to take hold in the South, Southwest, and the main metropolitan centers.

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The following shows a selection of the development projects that were announced after the visit:

  • Ogun state, near Lagos – There are plans for a $1 billion USD industrial park
  • Niger state, northeast of Abuja – a 300 MW solar power plant is slated to be built here at the cost of $478 million USD.
  • Kogi state, south of Abuja – A farm and industrial center will be built for $363 million USD
  • Lagos-Abuja expressway – $1 billion USD has been earmarked for this project.
  • $2.5 billion USD for the Lagos Metro Line
  • $500 million USD to go towards media broadcast equipment

President Buhari recently restated that Boko Haram (operating mostly out of the Northeast) has been downgraded and is no longer able to control territory as Nigeria and international partners have concentrated efforts to deny the group an area of operations within and beyond Nigeria’s borders.

An economic focus on the underdeveloped North would have a dual impact. Diminishing marginalization and alienation and fostering economic growth would serve to aid the overall economic growth, with the added benefit of ultimately diminishing the relevance of extremist groups’ ability to recruit.

This can also be viewed as a causal nexus where economic development is not implemented in the North and Northeast due to security concerns, and instability is in turn exacerbated by the chronic underdevelopment.

Valid Effort Lacking Focus on Underdeveloped States

The deal between Nigeria and China is a sharp example of the ways in which low oil prices have galvanized long-needed diversification efforts and national development initiatives. Whether or not this deal has the clout to put a dent in Nigeria’s current economic strain remains unknown, although some skepticism has been expressed.

In addition, by examining Nigeria’s history of northern marginalization and the related violence and support for Boko Haram, it is evident that most of the initiatives supported by China continue the trend of developing the infrastructure and economy of the South and Southwest, failing to equitably distribute the resources to benefit the whole of Nigeria.


Courtesy of Global Risk Insights © 2016

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