China-Nigeria relations have deepened in the areas of economic bilateral relations, strategic partnership, and foreign aid. Following years of bilateral relations which is traceable to 1971 when both countries first agreed to a formal relationship, several Chinese firms have gained continuous access to the Nigerian commercial space through investment, partnership, and development initiatives.
These firms have been active in various Nigerian sectors, ranging from construction to oil, telecommunication and others. In June 2024, the Nigerian government disclosed that about 200 Chinese firms have shown interest in investing in Nigeria’s economy. Chinese-owned Zhong Xing Telecommunication Equipment Company (ZTE) and Huawei are very strong in Nigeria. It is estimated that ZTE has sold over 40 million handsets in Nigeria and also provides equipment to Multilinks and Starcom service providers, while Huawei is ranked as the number one supplier in Nigeria’s domestic telecommunication market.
Nigeria also ranks as a major beneficiary of the Belt and Road Initiative (BRI). Through the BRI, notable federal government projects including Nigeria’s first communication satellite, NIGCOMSAT, expansion of international Airports Terminals (Lagos, Abuja, Port Harcourt, and Kano), the Abuja Light Rail Project, modernization of Nigerian railway lines (Lagos-Ibadan, Abuja-Kaduna and Idu-Kaduna sections), the Zungeru Hydroelectric Power project, the Greater Abuja Water supply project among others have been started and completed for public use. The involvement of China and its firms in Nigeria comes in various forms.
Bilateral support from a donor country to the recipient country can come in the form of loans, grants, and foreign direct investments (FDI). China has channeled significant foreign direct investments to Nigeria. For instance, between 2012 and 2022, China’s FDI stock in Nigeria amounted to $2.3 billion. The Lekki Free Trade Zone, Ogun Guangdong Free Trade Zone, and others which are joint ventures between China and federal or state governments in Nigeria are products of FDI inflow from China. Likewise, China’s aid to Nigerians has accumulated to the sum of $5.16 billion dollars in debt as of the end of 2023. The Nigerian Debt Management Office also acknowledges that China is Nigeria’s largest bilateral creditor. These strong economic ties and financial bonds are expected to ensure that both countries honour their trade agreements.
Aid and debt in China-Nigeria context
The economic interaction between Nigeria and China is laudable in the aid sector, and export of low-cost goods to China. Yet, China’s engagement with Nigeria is considered by some as ambiguous based on two factors. The first is that China does not always disclose the details of its aid or trade agreements for public accessibility. The second is the China Export-Import Bank (EXIM) and Ministry of Commerce (MOFCOM) guideline that the basic criteria for China’s soft loans is that Chinese firms be selected as contractors and 50% of needed equipment to implement the projects which the loans are obtained for must be sourced from China. This raises concerns about transparency and the social impact assessment of China’s financial involvement with Nigeria.
The complications around transparency of aid and trade agreements as well as the terms and conditions that guide these loan agreements contribute to the increasing inability of recipient countries to keep to their part of the agreement.
Ogun State versus Chinese Firm and the seizing of assets.
Following the bilateral investment treaty signed by Nigerian and China which allows Nigerian states to enter trade agreements with Chinese firms to promote commercial investments in 2013, Ogun state government entered into an agreement with Zhongfu, a subsidiary of the Chinese-based company Zhongshan Fucheng Industrial Investment Company Limited for joint venture trade to establish the Ogun Guangdong Free Trade Zone Company. The proposal for the free trade zone was approved by the Nigeria Export Processing Zones Authority and operation and control of the trade zone was granted to Zhongfu.
The central idea of the agreement between Ogun state and the Ogun Guangdong Free Trade Zone parent company is that the Chinese company, Zhongfu, will develop the industrial park and build factories for tenants’ use and it will own 60 percent of the joint venture under the terms of agreement. However, between 2015 and 2016, about three years after the agreement was reached, Zhongfu raised alarm, alleging that the Ogun state government hadbreached the agreement and backed out with intentions to take full control of the joint investment. As a result, Zhongshan Fucheng Industrial Investment initiated an arbitrary proceeding in a United Kingdom supreme court in 2018 claiming the Ogun government had organized a campaign of illegal acts and forced it out of the joint investment agreement. In favour of Zhongshan Fucheng, the UK court ruled that the Ogun state government pays a sum of £57.8m ($74.5m) as damages. Ogun has refused to pay the compensation till date which has accumulated to $81 million with interest.
Amidst the long-standing dispute and in a bid for the Chinese company to recover its compensation, Zhongshan filed an enforcement order with the Paris Judicial court because two presidential jets owned by the Nigerian government are currently sitting in Le Bourget Airport in Paris. These jets include a Dassault Falcon 7X and a Boeing 737 which are on display for sale and a newly purchased Airbus 330 at Basel-Mulhouse Airport in Switzerland. On August 14, the French court ordered a ban on moving or selling the jets until the Chinese firm receives its awarded damages. The Chinese firms also took further steps to confiscate Nigerian government properties in the UK after securing an order from the British court earlier in December 2021. The two houses are in Liverpool and are both guest houses owned by the Nigerian federal government. As of August 21, sources according to Business Insider and Peoples gazette have confirmed that Zhongshang Fucheng Industrial Investment company had concluded plans to sell the houses on eBay, a global online marketplace. There are also reports that Zhongshang Fucheng has plans to claim a £20 Million P&ID award for Nigeria in the UK. Though Nigeria has been able to recover the newly purchased Airbus 330, the hope for the recovery of other seized assets is still uncertain especially as neither Nigeria’s federal government nor the Ogun state government has come up with measures to fulfil their obligations in making the payment.
Implications for Nigeria-China diplomatic relations
Asset seizure and court settlement of trade disputes especially between a fast-rising economic power like China and a developing country like Nigeria will likely reinforce an existing debt trap notion towards China as seen in the case of the Zambian international airport. The Chinese firm’s recovery strategy of seizing Nigerian national assets could strain diplomatic relations between both countries. Seizing national assets including a presidential jet is considered an international embarrassment and an affront on Nigeria’s national sovereignty. The action can also be perceived as an aggressive move by China through its firm to assume ownership of Nigerian promising assets, which can resort in domestic pressure by citizens on the Nigerian government to relax its deep bilateral relations with China and its firms.
Evidently, in response to Zhongshan Fucheng’s court move, the Nigerian government through the Special Adviser to the Presidency on Information and Strategy claimed China is misleading the judicial courts and insisted that the Nigerian government has no part in the trade agreement between the Ogun state and the Chinese firm. The presidential adviser therefore accused China of having the aim of undercutting and scamming African governments through its firms, and he linked it to the P&ID crises. This can have a negative impact on the smooth bilateral relations between both countries and can lead to a shift in alliance by Nigeria by looking towards other countries with more favourable recovery measures. At the international level, China’s competitors can also leverage on this scenario to further project China as an unfriendly trade partner to Africa as seen in 2019 when the US White House accused China of using opaque agreements and debt to lure African countries into its orbit.
Chinese firms attempting to seize Nigerian assets over debt repayment could impact China’s diplomatic relations and existing treaties with other sub-regional African governments. Such a move might undermine the trust built through Sino-African partnerships, leading to fears of asset forfeiture across countries with Chinese loans. This could trigger a shift in regional attitudes toward Chinese financing, pushing governments to reconsider their dependence on China and seek alternative funding options. It may also prompt the renegotiation of treaties or a collective response from sub-regional bodies to mitigate the risk of losing economic sovereignty, weakening China’s soft power influence in Africa.
Overall, it is therefore imperative that both Nigeria and China consider a careful and diplomatic approach in resolving the ongoing trade crises. Measures such as diplomatic dialogue, renegotiation of debt terms, and confidence-building; both countries can agree to a moratorium on asset seizure while negotiation is going on. Soft diplomacy and the involvement of international financial institutions like the IMF and World Bank will be useful in mediating the financial aspects of the dispute. Nigeria and its subregions must assume the responsibility of respecting agreement terms while China and its firms must be more considerate in their dealings if the bilateral relationship must continue for the economic benefit of both countries.