For the past 15 years, China’s cumulative domestic investment in real fixed assets such as plant and buildings has driven Nigeria’s export growth rate upwards by 5 percent, research by the International Monetary Fund (IMF) has shown.
This phenomenon is, however, not limited to Nigeria as the report found that a 1 percent point increase in China’s domestic fixed assets investment growth also tended to increase Sub-Saharan Africa’s export growth rate on average by 0.6 percentage point.
Exports of other oil- rich countries in the region have also ridden on China’s domestic investment. According to the report, effect of China’s fixed assets investment on Republic of Congo’s exports was 12 percent, while that of Angola was 10 percent. Gabon’s stood at 6 percent, whereas Chad’s was pegged at 7 percent. That of Equatorial Guinea was 4 percent, but Cameroon’s reached a record 10 percent.
For non resource-rich countries, the effect of the fastest growing economy’s domestic investment is also highly felt. It has 22 percent on Comoros, which is highest on the rung of the ladder; and 2 percent effect on Burundi which is the least. Its effect on Malawi’s was 18 percent, while that of Kenya stood at 15 percent.
For the top five resource-rich countries, identified as Angola, South Africa, the Republic of Congo, Equatorial Guinea and the Democratic Republic of Congo, a 1 percent point increase in China’s domestic investment growth was accompanied by a 0.8 percentage point in their export growth rate.
‘’The intensity varies by country group. For example, this effect is larger for resource-rich countries in sub-Saharan Africa, especially oil exporters, which account for a large share of the region’s exports to China,’’ said the research report conducted by Paulo Drummond and Estelle Xue Liu of the IMF, contained the World Economic and Financial Surveys.
‘’Part of the effect is indirect, working through the impact of Chinese investment on global growth and commodity prices. But direct trading links are also important,’’ the report said.
In spite of the upsides of Chinese domestic investment, the situation comes with a number of downsides, much of which revolve around vulnerability and undue exposure. The report paid particular attention to this phenomenon and foresaw negative possible effects of the spillovers.
‘’Rising linkages with China have supported growth but also expose sub-Saharan African countries to potentially negative spillovers from China if its growth slows or the composition of its demand changes,’’ it added.
‘’In recent years, China has become the largest trading partner for the region and a key investor and provider of aid.’’
China has become Nigeria’s major trading partner in recent times, recording 18.2 percent imports into the country, according to official data.
China Customs’ data show bilateral trade volume between China and Nigeria as of 2006 was $3.13 billion, up by 10.6, from 2000 to 2006. China’s export to Nigeria was $2.85 billion, up by 23.9, while her imports from Nigeria were worth US$280 million, down by 47.3. Stakeholders are excited about the trading relationship but are pessimistic about the country’s overexposure to influx from China.
‘’China’s imports are often substandard and they stifle the manufacturing sector,’’ said Goodie Ibru, immediate past president of Lagos Chamber of Commerce and Industry(LCCI).
However, other analysts say Nigeria has not fully capitalised on the potential benefits, as possibilities exist for Nigeria to derive higher value from China’s growing influence.
‘’Far more needs to be done to expand policy creation, institution building, human capital, entrepreneurship, and the culture and leadership capabilities to maximize gain,’’ said Djeri-wake Nabine, in his research work entitled, ‘’The Impact of Chinese Investment and Trade on Nigeria Economic Growth.’’
‘’Most importantly, Nigeria needs to develop a comprehensive strategy to more effectively balance the engagement of China to leverage its own strength and create a plan for sustainable development that resonates with its citizens.’’
By: ODINAKA ANUDU
