Small Wars Journal

Capitalizing on Non-alignment Policy of Nigeria to Balance Economic Relations with the United States of America and the People’s Republic of China

Thu, 01/12/2023 - 8:11pm

Capitalizing on Non-alignment Policy of Nigeria to Balance Economic Relations with the United States of America and the People’s Republic of China

by Abubakar S. Nura

Introduction

The United States (U.S.) of America and the People’s Republic of China (PRC) arguably remain the topmost big nations competing to shape key global sectors, including the political, security, technological infrastructure, as well as economic structures. The resultant friction continues to manifest in other countries and regions. For one, Nigeria is a key commercial hub in the West African subregion that has significant economic relations with both the U.S. and PRC. Nigeria’s rising population, comprising a vibrant and innovative active labor force, coupled with vast natural resources makes it even more attractive for perpetual foreign direct investment.

Nigeria now serves as an “economic battlefield” for the U.S. and PRC in their quests for economic growth and influence. The two big nations are applying several ways and means to influence Nigeria’s commercial sector, which in turn present the country with certain gains as well as other costs. It is therefore in the best interest of Nigeria to leverage its current policy of non-alignment, to optimally benefit from its economic relations with both great powers.

U.S. Strategy for Economic Influence in Nigeria

The U.S. strategy in Nigeria entails supporting of programs centered on financial aid, agricultural development, trade, skill acquisition, health, and good governance amongst others. The U.S. has demonstrated capacity as a global superpower especially with regards to its military, technological, and economic might. Industrially, the United States is rated as the largest economy in the world and projected to attain a GDP of $25 trillion by 2024. Expectedly, U.S. foreign policies and strategies have also continued to evolve. One of the United States’ vital interests is to ensure cooperation and survival of its allies to shape an international system in which all can thrive.

The U.S. endorsed the African Growth and Opportunity Act (AGOA) in 2000 to encourage bilateral trade with eligible African countries like Nigeria, as well as private sector development to meet global best practices. Similarly, the United States African Development Foundation (USADF) has been working to improve investment in small and medium enterprises (SMEs) in many African nations. USADF has trained about 2,000 upcoming Nigerian entrepreneurs and provided them with certain grants through several partnership programs. Such measures are aimed at stimulating job increase and capacity building while providing a conducive environment for SMEs to access credits in Nigeria.

Another key program is the United States Agency for International Development (USAID), which is aimed at boosting economic coordination, management and promotion of economic reforms in Nigeria. U.S. Secretary of State Anthony Blinken, during an official visit to Nigeria on 18 November 2021, stated that the USAID is committed to a 5-year $110 million project known as Nigeria Power Sector Program,  to create more than 200,000 jobs with an estimated $18.5 million in annual tax revenues. Secretary Blinken further acknowledged that the U.S. and Nigeria have signed a $2 billion development agreement, which will be channeled towards significant investments for improving Nigeria’s rising youth access to quality education, public health, and other services necessary for them thrive in the country and global economy.

PRC’s Strategy for Economic Influence in Nigeria

            The PRC’s current economic strategy for Nigeria is reflected in Beijing’s Belt and Road Initiative that focuses on development and investment in key infrastructural facilities of nations involved. Worthy of note are China’s foreign investments, which have grown exponentially in Africa. Many scholars and experts argue that the PRC, which is considered to be second in position economically and with an increasing foreign investment profile, may outdo the USA soon. In Nigeria, the PRC has continued to deepen its economic activities as it perceives the country as one of the geostrategic and important economic African destinations to position itself as a global power. The first major commercial tie between the PRC and Nigeria was in 2001 when a bilateral agreement was made for a direct participation of Chinese companies in the oil and gas sector of Nigeria. A subsequent “oil for infrastructure” exchange agreement between the duo was reached in which China would be contracted for rail and road construction in exchange for crude oil value.

Over time, the PRC systematically established over 150 privately owned and/or joint venture companies in Nigeria, which employ about 200, 000 locals operating in the country’s vital commercial sectors ranging from power, technology, transport, communications, health and construction to mention a few. China has also more than often expressed readiness to finance capital projects in Nigeria without imposing glaring uncomfortable conditions. Particularly, China’s Civil Engineering Construction Corporation (CCECC) has secured contracts across the country with the majority funded by loans from China’s Export-Import Bank.

The Chinese government equally entered into a currency swap agreement with Nigeria, where the Nigerian Naira is directly exchanged to China’s Yuan in the actual currency value without having to convert to the United States Dollar standard foreign exchange rate for import and export transaction payments between the countries. The pact has in turn reduced the cost of importing goods from China to Nigeria and the other way round.

What Nigeria Stands to Benefit or Lose

            The U.S. strategy towards Nigeria seems to be characterized by economic growth, especially through investment in the Nigerian people. The United States is using its economic policies and influence, to promote a viable and established free market economy in Nigeria. The overall objective is the development of a network of responsible businesses and entrepreneurs capable of contributing to the Nigerian economy with customary levels of accountability. This will assist in increasing markets for Nigerian goods, investment opportunities, raising levels of income and advancing sustainable growth that is beneficial to the society, while still ensuring mutual foreign exchange earnings for both Nigeria and the U.S.

Meanwhile, Nigeria, like many other African and developing nations, is yearning for quick impact projects and critical infrastructural development. Some of the United States’ projects or economic policies can be quite slow to implement because of bureaucratic bottlenecks. In most instances, criteria specified for obtaining loans from the U.S. government may be quite difficult to meet based on reality. Besides, U.S. growing self-sufficiency in oil production and policy shift towards alternative energy sources has resulted in a drastic decline in oil trade with Nigeria.

On the other hand, the PRC’s high demand for oil and gas amongst other raw/agricultural materials remains a key thrust for Sino-Nigerian commercial relations. Bilateral trade between the two countries has continued to grow exponentially. As a result of China’s highly diversified economy, Nigeria seems to have found low-priced alternatives to the “higher costs” of Western/European goods and services. Additionally, the PRC’s deep infrastructural investment and funding strategy in Africa appeals to Nigeria’s need for a quick fix in the country’s infrastructural deficit. More so, China’s loan offers and grants without demanding tough repayment conditions, as well as its perceived noninterference policies in Nigeria’s internal politics, create a ‘conducive’ atmosphere for both countries’ economic relations.

Conversely, one major adverse impact of the PRC’s activities in Nigeria is overdependence on Chinese products and services, which inadvertently undermines Nigeria’s economic security. In addition, the presence of many Chinese manufacturing industries in Nigeria has steadily put local companies out of operations due to unmatched production outputs. Although PRC’s investments in Nigeria are huge, the bulk of the profits made are repatriated to China instead of being reinvested in Nigeria, thereby resulting in a trade imbalance. Also, there is a seeming lack of high Chinese technology transfer to Nigeria. Many of the technological companies that operate in the country manufacture their products in China before transferring them to Nigeria. These products are also handled by predominantly Chinese technicians in the country.

Non-Alignment Policy as an Advocacy for Nigeria’s National Interests

            Nigeria’s national interest post-independence is yet to be clearly defined. Still, the country’s foreign policy centers on non-alignment with any specific nation(s), but one which promotes mutual interests. Nigeria’s National Security Strategy 2019 (NSS 2019) emphasizes that Nigeria will remain non-aligned - as was advocated as a way out of the Cold War era - while recognizing that all nations seek to exploit opportunities and are vulnerable to insecurities. NSS 2019 further articulates the country’s desire to advance an international order founded on respect for international law, as well as mutually beneficial free and fair economic relations with other nations. In a bid to promote its economic relations and development, Nigeria joined the World Trade Organization, International Monetary Fund and World Bank amongst others. Nigeria has also been at the forefront of the Economic Community of West African States (ECOWAS) - a regional organization that seeks to integrate member nations into a single economic bloc.

Nigeria needs a steady foreign exchange market that is mutually beneficial with any country involved. Therefore, the country’s policy makers must carefully strategize with allies, especially with big nations, to promote national economic prosperity and development. The strategic importance of Nigeria’s economic relations with the U.S. and the PRC is quite tremendous. Nigeria has neither officially aligned with the U.S. or PRC, nor does it contradict their foreign policies or international interests. By recognizing its strength as a destination for great powers in their pursuit of economic expansion, Nigeria could capitalize on its non-alignment status to strike a balance in benefitting from its economic relations with both great powers. Nevertheless, the dynamics of reality suggest that these relationships are not without high points and/or shortcomings.

            Indeed, Nigeria stands to benefit from its economic relations with both the U.S. and the PRC. While the U.S. policy towards Nigeria centers on investing in the Nigerian people and businesses for economic growth and self-sufficiency, the PRC focuses on providing key infrastructural facilities, services, and the oil export market that Nigeria desperately needs right now. Nigeria should therefore ensure that it balances relations with both great powers, and this needs to be done in consonance with its national interest and other core international values.

Nigeria must also ensure the implementation of credible financing policies that would provide a business friendly, open, and stable economic environment to support the United States’ investments in Nigerian entrepreneurs and businesses. With regards to the PRC, Nigeria must emplace measures to reduce dependency on Chinese products by supporting local companies through adequate training and skill acquisition. Again, concrete steps must be taken to review repayment modalities for loans or debts owed to China.

 

Bibliography

Abiola Odutola.  “How the Chinese Are Taking over Nigeria’s Economy,” Nairametrics (blog), November 28, 2019, https://nairametrics.com/2019/11/28/how-the-chinese-are-taking-over-nigerias-economy/.

Admin, “The World’s Top 5 Largest Economies in 2024,” FocusEconomics | Economic Forecasts from the World’s Leading Economists, December 18, 2017, https://www.focus-economics.com/blog/the-largest-economies-in-the-world.

AIDDATA.  “Project | China.Aiddata.Org,” accessed May 24, 2022, https://china.aiddata.org/projects/1844/.

Ajugwe Chukwu. “Assessment of China and Nigeria Currency Swap: The Positive Impacts on the Nigerian Economy,” International Journal of Research and Innovation in Social Science (IJRISS) |Volume IV, Issue III, March 2020,  https://www.rsisinternational.org/journals/ijriss/Digital-Library/volume-4-issue-3/218-223.pdf.

Andrew Chatzky and James McBride. “China’s Massive Belt and Road Initiative,” Council on Foreign Relations, accessed May 24, 2022, https://www.cfr.org/backgrounder/chinas-massive-belt-and-road-initiative.

Bruce W. Jentleson. “Chapter 1: The Strategic Context: Foreign Policy Strategy and the Essence of Choice | American Foreign Policy, 4e: W. W. Norton StudySpace,” accessed May 24, 2022, https://wwnorton.com/college/polisci/american-foreign-policy4/ch/01/review.aspx.

Daniel F. Runde. China and SMEs in Sub-Saharan Africa: A Window of Opportunity for the United States. Centre for Strategic & International Studies Report. accessed May 24, 2022, https://www.csis.org/analysis/china-and-smes-sub-saharan-africa-window-opportunity-united-states.

Deloite Consulting LLP.  Power Africa Nigeria Power Sector Program Quarterly Report. accessed May 24, 2022, https://pdf.usaid.gov/pdf_docs/PA00XJS2.pdf.

Premium Times. “U.S. Signs $2.1 Billion Development Assistance Agreement with Nigeria,” November 20, 2021, https://www.premiumtimesng.com/news/top-news/496410-u-s-signs-2-1-billion-development-assistance-agreement-with-nigeria.html.

Sigli M. Mumuni and Shelly Ann Murphy. “China’s ‘Going Global’ Policy in Africa: An Exploratory Overview of an Evolving Policy Framework,” Journal of Asian Research 2, no. 1 (January 23, 2018): 11, https://doi.org/10.22158/jar.v2n1p11.

The Presidency. National Security Strategy Nigeria 2019. Abuja. https://ctc.gov.ng/wp-content/uploads/2020/03/ONSA-UPDATED.pdf.

Tomas F Husted and Lauren Ploch Blanchard. Nigeria: Current Issues and U.S. Policy. Congressional Research Report No. RL33964. https://sgp.fas.org/crs/row/RL33964.pdf.

 

About the Author(s)

Abubakar Sadiq Nura is a Nigerian Military Officer currently pursuing a masters’ degree in the Defense Analysis Department of the Naval Postgraduate School, Monterey, California.