Chinese Businesses in Nigeria: Matters Arising!

With about 22 million unemployed Nigerians, 91 million in extreme poverty and almost all economic growth indicators heading south, there is no doubt we desperately need massive inflow of Foreign Direct Investment (FDI). Latching on our situation, there has been an exponential influx of Chinese population and firms in Nigeria.

Presently with about 1,000 firms that have created many jobs and investment of about $20 billion in Nigeria, there is no question that Nigeria is attractive to Chinese firms and government. But who will not be interested in Nigeria? A weakly regulated big market of about 200 million consumers where all you require as a fair-skinned foreign firm is to ‘bow’ to very few power circles or agencies and you can do and undo to accumulate wealth, a friend lamented!

From labour exploitation, tax evasion, over/under invoicing, anti-competitive behaviors to economic sabotage among the many accusations against foreign firms in Nigeria especially the Chinese ones, the question is who do we blame- Nigeria or Chinese firms.

Of course the blame should be on Nigeria. Not only is there widespread evidence to show that our regulatory agencies are weak, our government most times behaves in ways that suggest we are unserious as a people and as such should not be taken serious. Two recent developments buttress my point.

First, imagine the board and CEO of a struggling firm selecting most of their executive directors without any kind of test or questioning on how they will strategically contribute to the growth and performance of the firm or even the sectors they will lead. Without confirmation of their competencies and deep understanding of the firm’s business plan (strategy), it is only a very infrequent miracle that can help the firm perform well.

Imagine also a board and CEO who also formulates the four-year strategy plan of the firm without the executive directors that will execute the strategy. In addition to limited understanding of the strategy, sense of ownership and responsibility most required for effective strategy execution will be low and outcome expectedly will be poor.

In a survey on the main causes of failure of a firm (even nations), strategy is allocated the highest mark of 39 percent. It is followed by operations at 28 percent, hazard at 19 percent and then the lowest mark of 14 percent to financial factor. Interestingly, further analysis reveals that even the operational, hazard and financial factors can be attributed to strategy especially execution.

With the above analogy, the possible exploitation of our economy by Chinese firms and our wider predicaments as a country especially under PMB can be better understood. A situation where the executive directors (ministers) that will be in charge of our strategy execution are not questioned on the capability to serve as executive directors and on the strategy of the country is sad.

A worse situation is when the Ministers were not even part of the strategy formulation team. With limited understanding of their roles/portfolios in the formulation and execution of the strategy (economic development plan), everything will be treated in the same way of ‘bow and go’ through which they became ministers. With low sense of responsibility, everything is treated haphazardly. Lamentably, as they are the very senior managers of our economy and nation, their negligent approach will be emulated and cascaded down to all segments of our society. In that manner, our regulatory and enforcement agencies which they supervise will be their replicas.

While there is no doubt that FDI including the ones from China can be beneficial to Nigeria, it is important that we do not get carried away with the euphoria of the assumed benefits of FDI such as job creation.

If we are serious in creating a sustainable economy, it is pertinent that all FDIs, including the ones from China, are properly scrutinized to ascertain all the pros and cons of accepting such investment. It is important that we appreciate that the increasing inflow of Chinese firms and people into Nigeria is not because of their deep love for Nigeria; rather it is purely for Chinese interest.

With about 1.4 billion people to feed and determination to sustain their increasing global economic and political influence, the unending demand for raw materials and business expansion into other parts of the world especially Africa cannot be questioned. As this is the case, caution must therefore be applied in our increasing relationship with China. This is to avoid the same mistake we made with European colonialists that left us deeply disadvantaged in the global economic dynamics and competition.

While we suffered direct colonization from Europe, it is important that we avoid indirect colonization from China through loans and other business relations. For instance, there are wide allegations and evidences suggesting that Nigerians are normally employed for menial and lower jobs in most Chinese firms in Nigeria. If this is the case, it means that the job creation impact of Chinese investment in Nigeria is defeated.

With the entrepreneurial spirit of Nigerians, I think that whatever we are hoping to get from many Chinese firms can be achieved through indigenous Nigerian firms. All that is required is for Nigerian entrepreneurs to be provided the same support that the Chinese firms receive from China. These include access to affordable finance, provision of basic infrastructure and business friendly regulations and taxation.

While in Europe 95 percent of all businesses are small and medium enterprises (SMEs), they generate about 85 percent of jobs in a region with about 6.3 percent unemployment rate. The reverse is the case in Nigeria. Even though 90 percent of all businesses in Nigeria are SMEs, they generate about 80 percent of the jobs. With the unemployment rate at about 23 percent this translates to over 22 million unemployed Nigerians.

A situation where SMEs in Nigeria are faced with interest rates above 20 percent and further harassed by an average of seven regulatory/supervisory agencies for all kinds of fees and taxes desired growth will not achieve the.

As we might not achieve our desired sustainable growth through over reliance on Chinese firms, it is imperative that our own SMEs are properly supported starting from properly selected executive directors (ministers) that can effectively formulate and execute a detailed and inclusive national economic development strategy.

Franklin Nnaemeka Ngwu (PhD)

Dr. Ngwu is a Senior Lecturer in Strategy, Finance and Risk Management, Lagos Business School and a Member, Expert Network, World Economic Forum.