Ready, willing, and waiting

Months after polls, Chinese investors stand by to see what Nigeria has in store for them

When an Ethiopian Airlines Boeing 787 disgorged its payload at Nnamdi Azikiwe International Airport in Abuja, the Nigerian capital, soon after midday on Sept 5, the stream of passengers heading toward the exits and the baggage carousels offered up an interesting story.

Flight 911, from the Ethiopian capital, Addis Ababa, has long served as a kind of shuttle for Chinese doing business in Nigeria, or planning to do so, but this day Chinese faces were conspicuously absent.

Nigeria needs to diversify its industry and Chinese businesses are waiting to help. Viju Industries (Nigeria) Ltd, based in Lagos, is a Chinese-funded company producing milk products. Provided to China Daily

"Perhaps it's simply because Emirates has put on a new flight to Abuja," said Li Qingyong, managing director of China Civil Engineering Construction Co Nigeria Ltd and also chairman of the China Chamber of Commerce in Nigeria, before adding: "But there is no doubt that the dwindling number of Chinese here in Nigeria is a sign of concern about the country's business environment under the new government."

Li was referring to the government of Muhammadu Buhari, who was sworn into office on May 29, exactly 100 days before that Ethiopian Airlines flight touched down.

He was also referring to what many observers regard as Buhari's unusual reticence in espousing any economic plans, before or since the election, and the fact that in his first three months or so in office he seems to have been preoccupied with just two things: a war on corruption and a war on terrorists.

Before the election there had been widespread public anticipation of brighter days ahead, but the honeymoon frisson that is often associated with new governments has been all but non-existent.

That is all the more surprising given the fanfare that greeted Buhari's All Progressives Con gress in May when it swept the former government from power, becoming the first opposition in the country's history to unseat an incumbent government in an election that most observers adjudged to be free and fair.

The rub for Buhari is that the highly oil-dependent economy whose reins he took control of has been rocked by falling international oil prices and by inflation, before and after the election, a huge challenge especially for someone whose previous experience in wielding national political power was 30 years ago, when he was the head of state for 20 months after a military coup.

Lawal Ado, director of the metro department of the News Agency of Nigeria, says that even now voters are willing to give Buhari more leeway and more time as they hanker for reassurance over the country's economy and the ability of the new leaders to straighten out its problems.

"In Nigeria, people like to talk about politics and leaders, and that is reflected in the daily newspapers," Ado says. "So we need strong leadership that can unify the country."

Nigerians need only glance at Buhari's career record to see that he is highly determined and disciplined and that he has what it takes to reinvigorate the country, Ado says.

Whenever Chinese companies consider setting up operations in Africa, economic and political stability are among the top issues they look at, and in the case of Nigeria lists of concerns on those matters have been relatively short. However, that may be changing.

Li says: "Our organization has more than 120 member companies, and none has withdrawn investment from the country. However, people are limiting the scale of business they do here, trying to identify new opportunities as they wait for the country's leaders to set out a new economic blueprint."

With a population of 173 million, Nigeria can boast of strength in numbers as Africa's most populous country, but in another realm, big numbers are now playing against it. Those figures relate to oil: 95 percent of the country's foreign exchange and 75 percent of its fiscal revenue are derived from it. When oil prices are high the country can virtually swim in its wealth, but over the past 18 months or so international oil prices have more than halved.

Not only that, but over the past year the value of the national currency, the naira, has fallen by nearly 20 percent against the US dollar.

Due to low currency flows and the falling oil price, the value of Nigeria's foreign reserves has fallen about 35 percent over the past year, from $47 billion to $30.7 billion, the lowest in three years. In addition, inflation has risen from 7.9 percent to 9.3 percent over the past 10 months, and the US investment bank JPMorgan Chase recently removed the country from its Government Bond Index for Emerging Markets, raising concerns about further depreciation of the currency.

Wu Tao, head of the China desk at the Guaranty Trust Bank of Nigeria in Lagos, says that while there is little doubt the ailing economy poses problems for Chinese investors and businesses in the country, it also presents opportunities.

"Depreciation of the naira has bitten deeply into the profits of many manufacturers and other businesses, particularly those with weak foundations," he says. "In trade, one of the defining areas of a bilateral relationship, importing goods and sending foreign currency overseas, has become highly problematic because of the lack of US dollars in the country."

Many Chinese and Nigerian businesspeople have to buy such currency on the black market at an exorbitant rate, which sends the cost of business and investment soaring, and there is no sign that this is about to change, Wu says.

"If Nigeria could only rid itself of its sole dependency on oil, it could put itself onto a path of sustainable development."

To bring economic diversification about, the government needs to put more effort into manufacturing and agriculture, and that will present opportunities to Chinese investors, Wu says.

Charles Onunaiju, director of the Centre for China Studies based in Abuja, says the election in May was historic for the country, giving it the chance to recast itself and become more attractive to foreign investors.

Given its economic, political and demographic heft, Nigeria ought to have been a standard bearer for the whole of the continent, Onunaiju says, but its image has often been tarnished internationally as the result of business and political corruption.

"The election gave the country a chance to transform itself and to create a new environment for growth. We want our partners to trust us and we want them to believe us."

Li of the China chamber of commerce says he is sure Buhari is intent on trying to streamline government and to create a better business environment, but investors worry about when a clear set of economic policies will be spelt out so they have a better idea of what their next investment steps should be.

Since the middle of last year, Nigerian politics and the economy have had their ups and downs, which has made Chinese companies in the country jittery, he says.

"We realize Buhari is committed to tackling corruption, of which we ourselves have been victims, but we still cannot work out what the economic priorities are supposed to be, and months after the election ministers are yet to be appointed. That has made it impossible to get answers out of the government on projects that Chinese companies are involved in. That in turn has put many of our member companies in a difficult position, having to put projects on hold, which is a huge problem, especially where Nigerian federal government funding is involved."

Infrastructure, mining and manufacturing have been affected in different ways, he says, and the federal government has not released any investment capital, except for emergency funding for public servants' salaries, in months. So most member companies have said they are sitting tight waiting for their investments to bring in returns.

"Fortunately there has not been a single case in our organization of a Chinese company pulling out of Nigeria as a consequence of what is going on, which points to the strong confidence people have in the country. It looks like this is just a temporary thing, and the future is bright. After all, Nigeria has the largest economy and market in Africa, which gives it a huge natural advantage.

"And if the work now being done proceeds to its natural conclusion, international investment will be a huge winner. We are glad to see Buhari has stressed the importance of integrity in honoring agreements and being consistent in the way policy is adopted and implemented."

Anti-corruption and anti-terrorism drives are not mutually exclusive with economic development, he says, and the expectation is that economic policies that Buhari eventually unveils will be implemented and bear fruit.

"Under President Xi Jinping, China is also waging a war on corruption, but you have to put everything in a holistic, long-term context. We hope Nigeria's leader can deal with corruption and economic growth simultaneously, rather than focusing on just one thing.

"The risk is that if you do not do this, social unrest, for example that caused by unemployment, will grow as the economy languishes, putting increased pressure on society as a whole."

Chinese investors are keen to see Nigeria's economy diversify, which would open up more opportunities to them, Li says.

"We want to see whole industry chains established in this country."

Sheriff Ibrahim, professor of the Department of Political Science and International Relations at the University of Abuja, says investors in Nigeria need to be patient as they wait for government measures to open the market, and in that regard China could serve as a template.

"Before this government came to power, Nigeria had a very good economic and political relationship with China. But it has not grown as much as it perhaps should have because of conflict and corruption in Nigeria. This government has had to start from scratch, and fighting corruption is the first thing that needs to be done to recover the country's wealth."

Ibrahim was referring to the state of the national coffers that Buhari says he faced when he took office: they were empty, he said, everything having been filched by corrupt officials. The officials who have been identified have been given a certain time to return the money, and so far there has been a certain amount that has been returned, although no exact number, says Ibrahim. Britain and the United States have told Nigeria they will do all in their power to help it find the money and have it returned.

Buhari and Vice-President Yemi Osinbajo have said they are taking a pay cut of 50 percent to save revenue and as an example of self-discipline to other government officials.

China's Belt and Road Initiative also presents opportunities for Nigeria to take a greater role in international markets, he says.

Nigeria's fight against the terrorist group Boko Haram in the country's northeast has damaged the country, he says, and it is important to have Chinese investors, especially infrastructure and power companies, on the ground to help rebuild any damaged infrastructure, he says.

Jiang Pingping, secretary-general of the China Chamber of Commerce in Nigeria, says now is the time for Chinese companies and potential investors to scout for new business opportunities everywhere in the country.

"Everything is new here, and the government wants change in all sectors. That's a clear sign for Chinese investors that if you have what it takes and have a long-term strategy, you will find this is a country with endless opportunities."

Nigeria has been widely depicted as economically stagnant or highly risky for investment recently, but the China chamber continues to receive queries from China about business opportunities, and visits from Chinese, she says.

"Another interesting thing is that most are not asking about infrastructure projects, which used to be the main field of Chinese investment, but manufacturing and mining."

lilianxing@chinadaily.com.cn

(China Daily Africa Weekly 09/25/2015 page1)