THE IMPACT OF ECONOMIC DIPLOMACY ON NIGERIA’S ECONOMIC DEVELOPMENT: CASE STUDY OF CHINA AND NIGERIA, 1999-2017
Onwualu, Zimuzor Nwamaka
Reg. No. 161325039
MSc Thesis Proposal
Department of International Relations and Diplomacy
Nile University of Nigeria, Abuja.
Communication is an integral element of human existence and interaction. This has always been necessary for both normal relationships and survival. The effectiveness of communication is responsible for peaceenjoyed among individuals and also for conflicts. Communication is therefore inevitable for the continual existence of the human race. It can be at the individual level in which it refers to flow of information from one individual to another and the use of the information to drive good human relations among people. It can also be between states and regions. Such communication is essential for the smooth running, growth and development amongst states globally. Such relationships could be political, social or economic, and usually expected to occur simultaneously because of theirinterdependent nature. It is obvious that no state can grow in isolation, without interaction with others.
States communicate through a tool known as diplomacy. Oxford dictionary defines diplomacy as “The profession, activity, or skill of managing international relations, typically by a country’s representatives abroad”. This is driven by state’s interests. Thus every country formulates and implements its foreign policy to gain economic advantage over other countries. There can be economic diplomacy between a country and a region resulting in regional blocks such as Economic Community of West African States (ECOWAS) and there can be economic diplomacy between just two countries such as between Nigeria and China. This project however will focus on the communication between Nigeria and China through an economic perspective.
About 50 years ago, China was known to be one of the poorest countries in the world and indeed at the same level of underdevelopment as Nigeria and other third world countries. The country was also isolated from the rest of the world through a deliberate policy by the then Chinese leader, Mao. At this time, Nigeria had its trade dealings with the United States of America and most countries in Europe. However, with the emergence of globalisation and deliberate economic development policy reform, China began to develop internally through education and gradually moved from an isolationist state to an open economy. China began to enter into agreements with the rest of the world. It became a signatory and assumed responsibility to the International Monetary Fund (IMF) and the World Bank in 1980(International Monetary Fund, 2004). This gave rise to China’s economic recovery. The major concern of China’s foreign policy was the development of peaceful relations with other countries in spite of their social system or ideology.This transformation experienced between the 1970’s and 1980’s was led by China’s paramount leader, Deng Xiapingwith his reform policies. These policies resulted in economic growth, infrastructure growth such as energy, market expansion towards exports and made China a better option for Nigeria in terms of economic relations.
Following the above, China-Nigeria Diplomatic relations were established and this relationship was recorded to be cooperative,smooth and steady. Nigeria and China economic relations became strong about three decades ago and this relationship is much more stronger at present. The two countries are signatories to a many trade and economic agreements, following the visit of President Obasanjo of Nigeria to China in 2001 and 2005 with the Chinese leader reciprocating both visits(Rindap, 2015).According to(Tope, 2011)an intergovernmental investment forum was established in 2006 to deepen bilateral relations between the two countries. Nigeria’s foreign policy towards China was “oil for infrastructure”. The former President Obasanjo who was also the Minister of Petroleum Resources gave out oil blocs to Chinese firms in exchangefor infrastructuredevelopment. On the other hand, China’s policy towards Nigeria was to boost its presence in Nigeria, through expansion of its export market to move their manufactured goods and technical expertise to Nigeria.
In 2006, China presented it foreign policy towards Nigeria. These policies ensuresmutual benefit, non interference in internal issues and equality. China seems not to be interested in Nigerians natural resources but most studies have shown that they are interested in energy and minerals(Shinn, 2007).Today, China is the strongest economic pillar for Nigeria and it’s relations with Nigeria is increasing. The quest for technological transfer, infrastructural development by Nigeria and the fact that China is pursuing an expansionist policy and ready to provide these needs have increased the need for economic diplomacy to increase between two states. The economic diplomacy between the two countries is strategically for national interest. The increasing relationship between the two states is quite alarming as China is fast taking over the position of USA and UK in Nigeria. Nigeria has not been able to keep up with the wind of globalization and China has taken this as an advantage to leverage on by helping Nigeria through loans and technical assistance in building of airports, railways, taking on infrastructural development plan for Nigeria and also exporting products at cheaper prices.
1.2 Statement of the Problem
Nigeria is known as the giant of Africa and its robust population and natural resources has made it a point of interest to many countries. Nigeria is signatory to many international conventions and belong to many international organizations. It has also been engaged in both bilateral and multilateral agreements. Most of these agreements were concluded in a bid to bring Nigeria out of its debt crisis and foster development. However, this has not been the case. Studies have shown that Nigeria’s debt is still on the increase and no substantial development has been recorded. While Nigerian academicians were trying to study and proffer solutions to the unfavourable economic relationship Nigeria has with US and UK, China springs up as another economic super power with better offers for Nigeria. Today, China is taking over US and UK’s position in Nigeria.
Nigeria and China’s economic relation is one to be admired as the two countries have some things in common namelystrong economic powers in their continents and large population. The challenge is while China is making use of its large population for producing and exporting goods and technical manpower to Nigeria and other countries, Nigeria’s large population are busy consuming and importing Chineseproducts and services.This is largely as a result the difficulty in diversifying Nigeria’s economy to manufacturing and services. China does not only export goods to Nigeria, they export services, technology, manpower and give loans for projects which they end up executing. Nigeria is now having a high influx of Chinese expatriates building airports, railways, bridges etc in a bid to help Nigeria to develop. The materials for the projects are all imported from China. Therefore, most of the loans are spent in China by Chinese companies, adding little or no value to the Nigerian economy. With all of these happenings, Nigeria is still experiencing high rate of poverty, high rate of illiteracy, mortality rate is still on the increase and the achievement of sustainable development goals is farfetched. History has repeated itself over and over again. Nigeria receipt of loans and other developmental initiative have never been the solution to Nigeria’s economic challenges rather they intensify them.
There is a reason to question and study the economic diplomacy going on between the two countries. China is consistently exporting substandard goods to Nigeria which is known as “chinco”. There seems to be a lot of initiatives but “development” in the real sense, is not really felt by the masses.This is because of poor economic policies. Economic diplomacy that is not in the interest of the masses has failed. Studies have also shown thattrade relation between China and Nigeria is still on the increase while trade imbalance remains a major concern.The Observatory of Economic Complexity in 2015 by(Simoes) shows that Nigeria major export goes to India ($9.1B), Spain ($4.63B), South Africa ($4.58B), Brazil ($4.14B) and the Netherlands ($3.37B) while major imports are fromChina ($13.6B), the United States ($3.24B), the Netherlands ($3.22B), India ($2.28B) and Belgium-Luxembourg ($1.98B). From these figures, imports from China are very high compared to other countries. China is not even amongst Nigeria’s major export destination which means that there is a huge gap thereby highlighting flaws in the economic diplomacy between the two. It also goes on to show that even though there is an obvious increase in trade between the two countries, there is largely no positive impact on Nigerian economic development.Shinn goes on to argue that China will not reduce poverty in Nigeria but the trade imbalance will continue to pose more challenge for achieving development goal.(Shinn, An opportunistic Ally:China Increasing Involvement in Africa, 2007). The high influx of Chinese goods and services have put a lot of business out of operation in Nigeria, thereby increasing the rate of unemployment.
So the relationship between Nigeria and China now is not a Win-Win situation as being claimed by China but rather Win-lose situation as the reality shows.China promised to transfer technology but this has not been the case. Chinese expatriates import both machineries and labour from China which is a violation to the Nigerian Labour Law. They make use of their machineries and labour without passing down these technological skills to the locals. This is why most of the contracts are still given to the Chinese. Nigerians need to be aware that China is no longer an under developed economy but the second largest economy and can also be as exploitative as the west. It is all about strategic interests(Edgar, 2014).
This problem has been a matter of concern to researchers. There is a need to revisit the economic policies of Nigeria. There is a reason to question the economic diplomacy between the two countries and its impact on the Nigeria’s economic development.China and Nigeria will continue to have mutual interest. China is a country to reckon with as it is the fastest growing economy.Nigeria already depends on them for infrastructure development while China is taking massive advantage of Nigeria’s large populationas one of its top markets and its oil and gas. This high rate of import of goods from China has led to more challenges as local manufacturers are forced to go out of business, unemployment rate is high, many children are out of school, etc. There is also the issue of dumping of sub standard goods by China in Nigeria. There is therefore a need to question whether the situation is actually leading to economic development. This of course means that there is need to question what really constitutes economic development. The widening trade imbalance and its impact on Nigeria’s development is also a challenge that this study seeks to address in order to proffer solutions.
1.3 Research Questions
The research problem identified above raises some research questions:
• What constitutes economic diplomacy and challenges between Nigeria and China from 1999 to 2017?
• What is the trade imbalance between Nigeria and China?
• What is the economic development impact of the trade imbalance between Nigeria and China?
• Are there ways of improving Sino-Nigeria economic relations to make it more beneficial to Nigeria?
The overall objective of the study is to develop strategies of economic diplomacy that can give Nigeria competitive advantage over China in economic relations. The specific objectives are to:
i. ascertain instruments of economic diplomacy and challenges between Nigeria and China from 1999 to 2017;
ii. determine the trade imbalance between Nigeria and China;
iii. identify the impact of the trade imbalance on Nigeria’s economic development;
iv. suggesta new regime of economic diplomacy to give Nigeria competitive advantage over China.
1.5 Significance of Study
The results of the study will be useful to academicians, researchers, policy makers, business community, diplomatic community and anyone interested in economic diplomacy, thereby contributing to Nigerian development. For researchers and academicians, the results of the study will provide new knowledge on Sino-Nigeria economic relations. For policy makers, especially foreign and trade policy makers, the study will provide empirical data and inferences that can guide formulation of improved policies or successful implementation of existing ones. For the business community the results will improve economic fortunes of Nigerian exporters. For the diplomatic community, the study will provide information that will guide their work. Finally, Nigerians will benefit from the study because it will lead to improved economic development.
1.6 Scope of Study
This study focuses on the economic diplomacy between China and Nigeria from 1999 to 2017. The survey part of the study will focus on respondents from the Federal Capital Territory and Lagos state of Nigeria.
2. LITERATURE REVIEW
An extensive Literature Review is in progress. The review is in the following areas:
• Political economy of development
• Nigeria’s Foreign Policy with emphasis on Asian countries.
• Dependency and other related theories and their usefulness in the study of economic diplomacy.
• Historical background of economic diplomacy between the two countries.
• Trade imbalance between Nigeria and China.
• Impact of the trade imbalance on Nigeria’s economic development.
• Earlier work by other researchers on Sino-Nigeria relations and gaps in knowledge.
3. THEORETICAL FRAMEWORK
In international relation, liberalism gave birth to free trade and economic interdependence. Major setbacks of liberal principles have been recorded(Jalil, 2015). Economic interdependence has led to series of unequal partnerships between the developed and underdeveloped countries, thereby causing more poverty in underdeveloped countries. Economic agreements are implemented in favour of developed countries because underdeveloped countries cannot compete on the set standard. In international relations, this unequal relationship is often explained using dependency theory(Kiely, 2017).
The theory of dependency is an international relations theory. It has its root dated to Karl Max’s work where he explains the economic relations and structuralism between the rich and poor states. Karl Max points out that the economically rich countries take advantage of the economically poor countries in a bid to acquire or make more profits. Every state looks out for its own interest thereby causing an exercise of economic power and exploitation. Transiting from Marxist perspective, Raul Prebish, Director of the United Nations Economic Commission for Latin America and his colleagues in 1950’s became concerned about the cause of the unequal relationships between the developed and underdeveloped countries. This study found that the economic advancement in one country is often at the detriment of another, therefore as developed countries get richer, the underdeveloped countries get poorer(Ferraro, 2008). Their study goes on to highlight that the unequal economic relations is largely as a result of trade imbalance between the rich and poor countries. Poor countries export primary commodities at a cheap rate to rich countries. These primary commodities are thereby refined into finished products and exported back to the poor countries at a much higher rate, making it difficult for the poor countries to come out of the cycle of poverty(Ferraro, 2008).
Other dependency theorists include Andre Gunder Frank, Wallerstein, Dos Santos, Osvaldo Sunkel, Celso Furtado, Rodolfo Stavenhagen, EuzoFalleto and Frantz Fanon. They believe that underdevelopment is as a result of reliance on developed countries(Dinesh). Andre Gunder Frank, an economics professor, a marxist and also one of the founders of the ‘Dependence theory” divides the world into two: the metropolis(core) and satellite(periphery). He argues that the world system is created in such a way that thelatter is consistently dominated by the former(Uwazie, Igwemma, & Ukah, 2015).
In essence,underdevelopment in some countries are deliberately caused by developed countries
There have been different scholarly arguments and criticisms of dependency theory.However Ferrara (1996) notes that all dependency theorists seem to agree on the following notions:
“First, dependency characterizes the international system as comprised of two sets of states, variously described as dominant/dependent, center/periphery or metropolitan/satellite. The dominant states are the advanced industrial nations in the Organization of Economic Cooperation and Development (OECD). The dependent states are those states of Latin America, Asia, and Africa which have low per capitaGross National Products (GNPs) and which rely heavily on the export of a single commodity for foreign exchange earnings”(Emeh, 2013).
This theory is of the notion that economic resources are exported from periphery states to core states causing an economic advantage for the core state at the detriment of the periphery states(Rathore, 2012). It is also a major proponent of dependency theory that the depreciating situation of poor countries is as a result of the nature of the world system and the way in which the poor countries are integrated into the global system. This is done in such a way that the market access is provided by poor countries while wealthy countries look for ways to exert influence through various means. This can be through media, politics, education (Biswaro, 2012).
Prebisch recommends that in a bid to solve the dependency syndrome, import substitution industrialization through protective measures must be put in place to maximize trade benefits for the poor states(Namkoong, 1999). However, Furtado a Brazilian economist, unlike Prebisch, believesthat there is a limit to import substitution and advises that proper planning and investments are important for development(Mallorquin, 2007).
Dependency has largely increased in Nigeria because of its failure to implement import substitution. The poor countries are influenced by the wealthy countries to accept policies that will turn out in favour of wealthy countries. Basiccharacteristics of an underdeveloped country include: inflation, escalating exchange rate and heavy debt burden. This is the case with Nigeria. The loans given to Nigeria in a bid to foster development has led to more exploitation from western countries. Despite all the debt cancellations, the amount of debt is still high, employment rate is on the increase, majority of Nigerian citizens are still poor.
Forty years ago, China was also in this position as a peripheral country. However, it has been able to overcome the world structure to become the second largest economy in the world(Morrison, 2018).Prior to China’s economic reform, it practiced a closed economy but after the death of Mao, China began to move towards an open economy, establishing relations with the rest of the world. The west has been accused of causing underdevelopment but despite China’s relations with the west, China has been able to push past consumption to production (Morrison, China’s Econmic Rise:History, Trends,Challenges,and Implications for the Unites States, 2013).Reality has shown that there is a limit to dependency theory because the theory fails to offer an explanation as to the cause of economic development in some peripheral countries while others remain poor. The rise of China totally refutes dependency theory showing that there is no relationship between dependency and underdevelopment. Dependency theory does not proffer reasons as to how Brazil, Russia, India, China,South Africa(BRICS) were able to overcome the world structure. World system theorist, Wallerstein affirms that some countries will advance ahead while others will continue to wallow in underdevelopment(Ball, 2012).
Dependency theory is used in this study to explain the relationship between China and Nigeria because Nigeria depends on China for developmental aid and majority of its products and yet Nigeria is still underdeveloped. However, this study will also prove that Nigeria’s dependence on China is not a reason to remain underdeveloped. There are lessons to be learnt from China such as reforming economic, educationand foreign policies to favour Nigeria. These economic policies can only be formulated or reformed through a proper understanding of the current situation.This study argues that China’s efforts to develop Nigeria have not been fruitful. Majority of the people are still wallowing in abject poverty, poor access to clean water supply and sanitation, unemployment amongst the youth and no access to infrastructure in rural areas. Nigerians at this point in time need more than building and remodeling of airports, bridges, railways and roadsthat are done in such a way that the country acquires debts and the people do not learn technologically or gain economically. Economic and foreign policies should be formulated and implemented in such a way that they address the needs of Nigerian masses. According to World Bank, China invested in human capital that brought 500million Chinese out ofpoverty and was able to achieve all Millennium Development Goals (MDGs) by 2015(World Bank, 2018). Nigerians are looking forwardto an economy that will meet their basic needs. In as much as dependency theory is used to explain global inequalities,underdeveloped countries like Nigeria have a huge role to play towards their own development.
This study identifies the Basic Needs Theory as a way forward towards addressing the challenge. The most widely accepted explanation of the theory is that propounded in 1976 by the International Labour Organisation(ILO) It says:
“Strategies and national development plans and policies should include explicitly as a priority objective, the promotion of employment and satisfaction of the basic needs of each country’s population”(Bowler, The basic needs approach to development :Acase study of rural water supply in Nigeria, 1983).
International Labour Organization (ILO) points out that development should not just be seen in developing physical structures but in the provision of basic amenities for the population. They include provision of adequate food, shelter, clothing, certain household equipment, essential services like safe drinking water, sanitation, good public transport, sound educational and cultural facilities(Bowler, The basic needs approach to development :Acase study of rural water supply in Nigeria, 1983).
In this study, the above two theories will be used to study the current status of economic and foreign relations between Nigeria and China, with a view to making policy recommendations that can ensure that the relationship is in favour of Nigeria in the near future.
4. RESEARCH METHODOLOGY
4.1 Research Design
The research will follow the organizational framework shown in Fig. 1. The main expected outcomes of the research are balance of trade between the two countries which will be in favour of Nigeria and the subsequent economic development of Nigeria. The study will use both primary and secondary data for proper analyses. Historical approach will be used in explaining the Sino – Nigerian relations from 1999-2017 based on secondary data from books, journals articles, conference proceedings, electronic data bases and data from relevant agencies of government such as Nigeria Customs Service, Ministry of Foreign Affairs, Nigerian Embassy in China, Chinese Embassy in Nigeria, National Planning Commission, Standards Organization of Nigeria (SON), National Agency for Food and Drugs Administration and Control (NAFDAC), Nigeria-China Chamber of Commerce.Secondary data such as Sino-Nigeria foreign policy, import-export data, Chinese aid to Nigeria, Nigeria’s economic development data (GDP, GNP, inflation, exchange rate, productivity, competitiveness) will be obtained from these institutions. The secondary data will also be used to study Dependency and other related theories, import-export between the two countries, development aid and their impact on development of Nigeria.
Primary data will be used to supplement secondary data in the study. This will be achieved using structured questionnaire and interviews. The target respondents include: rural and urban dwellers, traders, civil servants, local manufacturers and general public, Chinese companies in Nigeria. Information to be obtained from the survey include: socio-economic status of the respondents; location and occupation of the respondents; perception of the respondents on China’s investment in Nigeria; Chinese products and services imported into Nigeria and their effects on Nigeria’s development; suggestions on how to reverse the trend of dumping from China; challenges in export of Nigerian goods and services to China.
The survey instrument will be a questionnaire, designed using the Likert-type response format. After designing the questionnaire, it will be validated by three experts. The internal consistency will be checked using Cronbach Alpha or any other technique. The interviews will be conducted using a checklist populated with the relevant questions.
The results will generate the status, challenges and impact of Sino-Nigeria relations on economic development of Nigeria. Using these, suggestions for policy reforms aimed at achieving a balance of trade in favour of Nigeria shall be developed. These suggestions will lead to economic development of Nigeria.
Fig. 1. Organizational framework for the research
4.2 Research Hypotheses
• There is no difference between the perception of Nigerians on Sino-Nigeria relations between rural and urban dwellers in Nigeria.
• There is no difference between the perception of Nigerian traders/manufacturers and civil servants on Sino-Nigeria relations.
4.3 Population and Sampling
For the survey aspect of the study, a population of 4000 is proposed. This is made up of 2000 each from rural and urban areas. The population is made up of traders, civil servants, local manufacturers, consumers. For each of these, a sample size of 250 each is targeted, giving a total sample size of 500 for the study. The respondents shall be chosen at random.
4.4 Data Analysis
Data analysis will involve use of simple statistics such as frequencies, means, standard deviation, t-test (for hypotheses), Cronbach Alpha analysis, Fisher LSD tests, Duncan Multiple Range Tests, ANOVA, trend analysis (correlation and regression). There will also be analysis using graphs, pie chart, bar charts. All these tests shall be accomplished using the SPSS Software.
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