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Chinese Nigerian Foreign Direct Investment Relationship Essay

2176 words - 9 pages

One of the many byproducts of globalization has been the surge of free trade agreements, bilateral trade agreements, and regional trade agreements signed internationally as markets respond to increased global demand. Despite China and Nigeria signing bilateral trade agreements, it is clear that China has benefitted more from this relationship than has Nigeria, at least in the short-run. If Nigeria is to increase its economic development and decrease corruption amongst the political elite, promote good governance and effective monetary policies, it would be able to use the current influx of Chinese money from oil revenue to develop into a hub for numerous foreign investors venturing into the African market. In this paper we examine whether the association between these two countries should be considered neo-colonial exploitation by a global super power or a mutually beneficial relationship for emerging economies based on vital commodities such as crude oil.
History of the Chinese-Nigerian Relationship
Beginning in the early 1950s and extending into the 1970s, China ventured into the African continent primarily as a promoter of Maoist-Socialist teachings and command economics towards nascent governments. In 1971, China and Nigeria forged diplomatic relations that eventually culminated into permanent bilateral trade agreements and investments. However, it was not until the 1990s that China returned--as a foreign direct investor--intent on investing in projects that would exploit the continent’s wealth of natural resources for exports, its abundant natural resource reserves, and the diplomatic leverage it would gain from forging strategic partnerships. Beginning in the late 1960s and continuing until the late 1990s, Nigeria experienced numerous military coups, a surge in political corruption, multiple ethnically motivated massacres, and an unstable economy that forced the country to turn inward. Such a collapse of government structure and economic stability prevented numerous investors and western nations to refuse to do business with Nigeria’s tyrannical, abusive government. China quickly filled the void vacated by western nations .
In 2001, both countries signed their first trade agreement, which stimulated Chinese business interests in the Nigerian economy, adding up to $1 billion to their $48 billion economy. In 2006, the two nations’ ties became even stronger when foreign ministers from each country met in the Nigerian capital and ratified the first of many memorandums of understanding between Nigeria and China on topics ranging from education, anti-malaria prevention, technology, infrastructure, and most importantly foreign direct investment. The relationship between these two countries hinges primarily on the wealth of Nigeria’s oil reserves, a commodity China wants to secure for their future industrial growth. This natural resource blessing of supposed “black gold” has in reality done very little for the Nigerian...

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