The Nigeria-China deal: A double edged sword

In what appears to be an audacious economic move, Nigeria is beginning to look east. Indeed, tough times-record low oil prices and historic budget deficit demand for tough decisions. Following the collapse of oil price, Nigeria’s economic managers have experimented with myriads of economic policies to mitigate the harsh reality imposed by dwindling Dollar denominated revenues and foreign reserve.

Since the establishment of the Bretton Woods Institutions, the dollar has reigned supreme as the global currency of exchange for trade. While it appears to have made global economic exchange easier, undoubtedly, the fortunes of most countries have been tied to their ability to earn, reserve and spend it. In the final analysis, the value and exchange rate of local currencies are largely determined by the reserves of dollars the country has.

Nigeria, like most underdeveloped economies, having a peculiar economic structure of being import dependent as well as relying on only one major source of dollar income is obviously at the short end of this dollar denominated trade equation. By implication, it has little or no room for foreign exchange policy manoeuvre when the situations become adverse as we currently have it. This agreement with China provides us, once more, with a window of opportunity for several lessons in economic management.

Firstly, the Chinese growth story is a simple proof that the most sustainable source of growth for any economy must come from within. China grew on its own terms in every sphere of international relations. Growth demands for sacrifice from all. Its one child policy of 1978 put a cap on run-away population growth, making it now self-sufficient in agriculture, water resources, housing, education, employment, internal security, and cutting edge technology amidst many other desirable national goals. The China story tells us that we cannot continue in our docile and wishful approach to national economic planning. Furthermore, on issues such as corruption that have the tendency to derail well intended economic growth policies, china has equally shown zero-tolerance by dealing decisively and publicly with exposed officials, irrespective of the political, cultural, or economic standing of the offender. Nigeria can borrow a leaf from this if the anti-corruption effort of the current administration is to yield the desired results.

Secondly, our newfound affair with China will not fix our problems overnight. So we must have a clear cut approach for growth and development. The Chinese template is there for us to imbibe.  Going forward, those at the helm of our national affairs must understand a simple rule for international relations “there are no permanent friends, only permanent interests”. We do not see Nigeria matching China’s economic strength, but we must use this as a springboard to the future. The loan can be invested into ventures with the potential for long-term growth like education, railways and agriculture as already outlined in the agreement. We do not need to re-invent the wheel. The Asian Tigers of Singapore, Hong Kong, Taiwan and South Korea benefited greatly from already laid down success of Japan.

Finally, Nigeria remains an indispensable part of a global economic equation, being the most populous black nation makes it an attractive foreign market for a large producer as China, however, we must be careful that this agreement does not open the floodgates to all Chinese goods produced with relatively cheap labour, government subsidy and cheaper currency that makes its export competitively cheaper. The direct impact of such a scenario will be the sudden death of our local industries, making the agreement cause more harm than good. As China continues to push for the global relevance of the Yuan, agreements with regional economic hubs like Nigeria will give such agenda impetus and this is where it becomes obvious that Nigeria, after all, can still rise to take its rightful place among nations.

Njoku .T. Chidiebere