China Nigeria

Made in China: Chinese Investments Rise in Nigeria as SME Businesses Fail

China is increasing its state-backed media presence in Africa in an effort to increase its soft power.

The soft-power approach is a compliment to China’s growing business influence in a continent that is now more than $143bn in debt to China.

In Nigeria, a large proportion of goods are imported for use by the population, most of which come from China. $9.6bn worth of goods are imported from China yearly, as opposed to the nearest figure, $3.03bn from Belgium-Luxembourg. Figures from the John Hopkins School of Advanced International Studies, however, establish that Nigeria is nearly $5bn in debt to China as of 2017.

SME businesses in Nigeria also import a large percentage of their goods from China. In markets in Nigeria’s biggest city, Lagos State, wholesale shops stock goods imported from China, ready to be resold to the population. As Chinese investment soars in the nation, Chinese imports are a significant part of Nigeria’s market, increasing China’s economic power in the oil-rich nation.

Speaking on Chinese loans to Nigeria, former President for the Association of National Accountants of Nigeria, Dr Sam Nzekwe, said: “Most times, they say the loans are directed towards one outfit or the other, like rail system. [The Nigerian government] take these loans but they have no impact on the economy, because what happens in such loans is that there will be no local content into it.

“Like here now, all the spare parts are from China; even the machinery are from China, all the things you use to work are from China. So what happens is that technically, you have paid up the money back to them and then, you are still owing them. But if we have something to contribute towards the implementation of that rail system, then the money will circulate within the local economy, but this is not there.

One SME owner, whose business suffered following Nigeria’s recession in 2016, told InsideOver: “ever since the recession, the quantity we are selling has reduced from 100% to 10%. “We aren’t getting any customers into the market anymore. The few shops that receive customers, we honestly don’t know where they are getting their goods from, to be able to sell them at such a low price.

“There are Nigerian and Chinese goods in Nigeria, and they’re not all bad quality either. It depends on what quality you want and what standard you request for your store,” she continued, “The only people who are selling goods import from many countries worldwide. People who only sell low-quality goods from China still sell too, but there is not much money in the country, so it makes the market generally slow.”

The business owner, who has run a business in Nigeria since the 1980s, imports goods from China and the UK. She reinforced that the problem is not with Chinese imports.

“No one knows what is going on. For two days now, no one comes into the shop to buy. The whole of Nigeria seems ruined. Even petrol station owners are running to Canada. They used to be really rich, now they are running at a loss. Things are becoming harder and harder. Give someone ₦2,000 ($6), and it seems like ₦2m ($5,500) to them. Coupled with the fact that, nobody can eat, because of high rice prices, the nation is really bad. “People can’t afford anything. It’s ridiculous. There is flooding everywhere now. There is pollution everywhere, because plastic bags are blocking the gutter.”

Figures from the National Bureau of Statistics reveal that 24.44% of goods imported into Nigeria in the first quarter of 2019 were from China. Whether through loans, investments or imports, China’s economic presence in Nigeria offers few tangible positive returns. Nigeria’s infrastructure, politics and economy must first be fixed before businesses can thrive in the nation.

Last week, Nigeria rose up 15 places on the World Bank’s Doing Business 2020 Index, moving up to 131st, up from 146th last year.

“The ease of doing business may be better, but the actual process of running a business has been stifled,” Tunde Leye, a Nigeria-based business analyst with SBM Intelligence, said. The closure of Nigeria’s land borders about two months ago, has stopped the flow of goods (mostly agriculture) from neighbouring countries into Nigeria. The closure came, despite some of the world’s poorest countries, such as Niger and Benin, relying on Nigeria’s oil-based economy for survival.

The closure, however, has not affected Nigeria’s ports, where imports from wealthier countries are still accepted. The 2016 recession, caused by dwindling global oil prices, would hit small and medium businesses hard in Nigeria. Coupled with Buhari’s reactionary policy to limit access to foreign currency in an effort to influence the population to buy Nigerian goods, SME businesses began to fail in 2016.

Buhari’s policies continue to hit small and medium businesses in Nigeria, as SME shops in Lagos city close rapidly. Unlike the West, Nigeria’s market access to cheaper-made Chinese products does not bring down the value of its goods. In the past few decades, Chinese goods have allowed SME businesses to trade profitably in the country.

Today, the accrued effects of past governmental policies are beginning to show. Coupled with Buhari’s short-term fixes to long-term, decades-old problems, nothing Chinese is made in Nigeria, except for the African giant’s debt.