Nigeria to Expand Manufacturing; UN Praises China’s Belt and Road

APRIL 11, 2019

Nigeria plans special economic zones to double manufacturing by 2025

(courtesy thisdaylive.com)

Nigeria is Africa’s biggest economy but it lacks a strong manufacturing base, which contributes less than 10 percent to its total gross domestic product (GDP). The country has maintained a strong currency to ensure it can keep imports pouring in, with a growing proportion coming from China.

 

“Project MINE’s (Made in Nigeria for Export) strategic objectives are to increase (the) manufacturing sector’s contribution to GDP to 20 percent … and generate over $30 billion annually by 2025,” the ministry of industry, trade and investment said in a statement.

The government has set up Nigeria SEZ Investment Company, which will finance industrial parks in special economic zones in the commercial capital of Lagos, southeastern state of Abia and northern state of Katsina.

The government is currently raising capital of $250 million for Nigeria SEZ Investment Company. It plans to double its equity to $500 million over four years, the ministry said.

The West African country’s manufacturing and agricultural sectors have been neglected since the 1970s oil boom, when Nigeria began making easy money from crude oil sales.

Nigeria, where the vast majority of the population lives on less than $2 a day, recently emerged from a recession but growth is fragile and the government is trying to diversify its revenue away from its reliance on oil.

President Muhammadu Buhari, who is due to start a second four-year term next month, has pledged to revive the economy and is focused on building roads and expanding the railway network to lower production costs…

__________________________________________________

UN Africa Official Vera Songwe Calls BRI ‘Probably One of the Biggest Growth and Development Initiatives in the World’

In an interview with the Xinhua that appeared on April 10, Vera Songwe, executive secretary of the UN Economic Commission for Africa (UNECA), hailed the role that the China-proposed Belt and Road Initiative (BRI) would play in addressing Africa’s problems in infrastructure and job creation. She told Xinhua that the BRI will positively affect hundreds of millions of people in different countries, while it helps Africa develop infrastructure connectivity of varied types and creates job opportunities that are pressing issues on the continent.

“This (BRI) is probably one of the biggest growth and development initiatives that we have in the world,” the UN official said, adding that the BRI is essential to the continent. She believes that the initiative, in which many African countries “infrastructure today is one of the necessary requirements for Africa’s growth,” Xinhua reported.

China is NOT Exploiting Africa, But Investing in its Future: The Case of Nigeria

The article below, “Nigeria’s balanced and diverse relationship with China is key to sustainability,” provides a useful examination of the healthy bilateral relationship that China has developed with Nigeria, especially during the administration of President Buhari.  It is also important to note that Nigeria has officially joined China’s Belt and Road Initiative in January of this year. (excerpts below followed by a link to complete article)

1)    Infrastructure

Nigeria has one of the largest infrastructure deficits in the world; two thirds of the population still does not have access to safe water and over half of the population has no access to reliable electricity. Logistics costs are also extremely high; it costs more to transport a good from Lagos in Nigeria’s South to Kano in the North (1000km), than it does to ship a good from Shanghai to Lagos (over 12,000 km).

Nigeria’s government is investing in infrastructure, but external funding is needed. As cited in the National Integrated Infrastructure Master-plan (NIIMP) developed by Nigeria’s Ministry for Planning in 2015, it is estimated that the country requires $3 trillion over the next 30 years, with $500 billion required in the first 10 years. This estimate, which has wide sectoral scope, is reached by comparing Nigeria’s core infrastructure stock of around 20-25% GDP to international benchmarks of around 70%. Yet, even as the government increased its budget allocation for capital expenditure to 30% in 2017, this remains at least 80% short of the annual amount prescribed by NIIMP.

Alongside self-funding new infrastructure, Nigeria has also looked to the World Bank, European Commission and African Development Bank as sources of infrastructure capital. Yet while they might have the risk tolerance and investment horizons, their capital remains diluted over a number of countries. In its 60 years of operation in Nigeria, the World Bank has invested on average $100 million on infrastructure a year – significant but still a drop in the ocean versus Nigeria’s needs…

3)    Manufacturing    

While Nigeria is the richest economy in Africa, with the largest population and one of the better educated work forces, 4 in every 10 people still remain unemployed. Nigeria needs more inclusive industrialization that creates jobs for all, as opposed to focusing solely on sectors such as oil. Opportunities lie in the manufacturing sector, which creates more jobs through stronger forward and backwards economic linkages than any other sector.

Nigeria is again leveraging its relationship with China here. Some Chinese manufacturers have started relocating production to Nigeria, partly in response to rising wages in China and to take full advantage of the size of Nigeria’s domestic market. Sun Ceramics is one such example; they produce ceramics the size of 10 football fields every day, employ over 1,000 locals and also source all their raw materials from Nigeria. If it weren’t for Nigeria’s difficult business environment, Chinese firms claim they would commit greater amounts of investment.

Stronger ties to stand the test of time.

Nigeria, however, has managed to…build a balanced and more diverse relationship with China. Nigeria’s relationship with China extends beyond resources and infrastructure to security, financial planning and sharing of best-practice in manufacturing, to name a few areas of cooperation. Particularly in the realms of security cooperation; the Chinese have found an area that helps win them local support on the ground in Nigeria given a near-universal desire to eliminate insurgent forces. Nigeria also recognizes that the size of its domestic market offers the largest opportunity in Africa for Chinese companies; and that has helped to improve the balance in the relationship.

It is this combination of balance and diversification that is key to a sustainable relationship with China.

 

Read: Nigeria’s Balanced and Diverse Relationship with China