China affirms support for Nigeria in tough times

Challenging year seen ahead as oil prices, security woes create concerns for investors

The state visit of Chinese Premier Li Keqiang to Nigeria in May made a significant statement about Beijing's commitment to the country.

Li's attendance at the World Economic Forum on Africa in Abuja, Nigeria's capital, came as the country was under a serious terrorism threat. The previous month, Boko Haram terrorists had shocked the world by kidnapping more than 200 girls from a secondary school in Chibok.

No other major state leaders showed up for the forum. This caused Nigerian President Goodluck Jonathan to call China a "genuine friend" to his country.

Ties between China and Nigeria have been built around growing trade and investment since the second half of the past century, and the relationship experienced an unprecedented boom during the past 10 years.

Despite the slump in worldwide oil prices, the daunting security situation and the outbreak of Ebola in West Africa - the virus was quickly squelched last year in Nigeria - China's total trade volume with Nigeria by the end of November had exceeded $16.46 billion. That was third in the continent in 2014 after South Africa and Angola. Ten years ago, the volume for Nigeria was $2.83 billion.

Infrastructure remained a key sector for Chinese investment last year, when a Chinese state-owned company, China Railway Construction Corp Ltd, signed a contract with Nigeria's government to build a coastal railway in the south. The project would facilitate the link between the oil production region and the county's economic capital, Lagos. The contract is worth $11.97 billion, making it the biggest single infrastructure contract signed by a Chinese company overseas.

Meanwhile, other trends were occurring. The United States, which has developed its own shale gas resources, did not import oil from Nigeria for six consecutive weeks, which was a first in recent times. Also, other Asian countries, especially India, had caught up as major shareholders in Nigeria's lifeline industry. China imported an average of 41,000 barrels of oil a day from Nigeria in the first eight months in 2014, an increase of 105 percent over the same period in 2013.

As industrialization deepens in Nigeria, the manufacturing industry is in dire need of foreign investment. Many Chinese investors have shown they value Nigeria's pivotal status in western Africa by looking at establishing factories across the region and expand the local market.

Last year, Nigeria overtook South Africa as the largest economy in Africa. According to the World Bank, Nigeria's GDP in 2015 will increase at a rate of 5.5 percent, a bit slower than that of 6.3 percent in 2014. It would, however, be higher than the average rate of 4.6 percent in sub-Sahara Africa.

However, foreign investors, including Chinese, see that there are challenges ahead in 2015, including domestic and international threats that have bred doubts among some observers.

Boko Haram is still threatening the country's security and some crimes also have added pressure to local authorities, especially in the north. A Chinese citizen was kidnapped in September and more robbery cases targeting Chinese nationals and companies were reported last year, which caused some to have a cautious attitude toward living and doing business in the country.

Nigeria's general election is set for Feb 14. Voters will elect the president and members to the House of Representatives and Senate. Jonathan, the incumbent president, will seek a second and final term. Some investors have delayed their plans to see if policies would change.

While the country wants to develop its manufacturing capacity and Chinese investors also are eager to bring production closer to the market, basic infrastructure supplies such as water and power remain poor. So a properly working infrastructure network is crucial to attract future potential investors. But the concern of some is that budget for these might be cut if more money is diverted to anti-terrorism efforts.

According to the World Bank, a tightening in foreign currency controls and the unexpected drop in oil prices are expected to pose serious challenges to the government, which might directly affect foreign investment.

lilianxing@chinadaily.com.cn