Will Nigeria’s Infrastructure Gaps Push it Closer to China?
Image courtesy of Nupo Deyon Daniel on Unsplash
One of the biggest, if not the biggest, challenges to Nigeria’s economic growth is its lack of quality infrastructure. The World Economic Forum’s Global Competitiveness Report for 2019 ranked Nigeria’s infrastructure as 130 out of 141 countries. To compete on the global stage and address problems such as poverty and lagging human development, Nigeria needs improved infrastructure to service its economy and development goals.
The Nigerian infrastructure gaps can be seen in the power sector, where Nigeria’s plants can potentially generate 12,522 MW of electric power each day. However, the country can only deliver less than 5,000 MW on most days, which isn’t enough for the 30,000 MW needed to supply the entire population with access to electricity. According to current estimates, the infrastructure deficits can be seen in various other sectors as well: In 2017, only 16 percent of roads were paved and only about 30 percent of the population had access to improved sanitation facilities. To build more infrastructure and catch up economically, Nigeria has turned to world powers, especially China, for capital to fund projects.
In recent years, Nigeria has engaged in some ambitious infrastructure projects, many of which were implemented with Chinese funding. In 2018, the country formally joined the Belt and Road Initiative. Some major Nigerian projects that China has played a major role in include the Kano railway line, Lagos-Kano railway line, and Lagos-Ibadan railway line. The Lagos-Ibadan Railway connects rural areas to Nigeria’s industry centers and has several benefits: creating new jobs, increased investment and more convenient transportation. For construction projects, China is Nigeria’s favored partner for financial assistance. China has provided a majority of project costs in loans; for the $874 million total cost of the Abuja-Kaduna railway, China loaned $500 million, and for the NIGCOM satellite, China loaned $200 million out of the total $257 million cost.
Despite the benefits of being able to build such infrastructure, there are also downsides of this relationship that vary with each project. With the large amounts of capital loaned, will Nigeria be able to pay China back? Either way, debt repayments have been taking up significant portions of Nigeria’s budget, leading to concerns that the government isn’t able to invest as much in other important areas like education and health. Another unavoidable concern is the consequence of passing up local firms for foreign ones. Many projects in Nigeria are implemented by Chinese companies, such as the China Civil Engineering Construction Corporation (CCECC), which places local Nigerian companies at a disadvantage. In response to the frustrations of domestic construction companies left out of large infrastructure projects in favor of Chinese contractors, Nigeria's transportation minister Rotimi Amaechi said that the local companies must build capacity before they are qualified for those projects. The requirement of five years of experience in the relevant field, as articulated by Amaechi, is a challenge for Nigerian firms and brings into question how Nigeria can better utilize domestic firms, in turn building local capacity, to meet its infrastructure needs instead of relying primarily on China.
In terms of foreign investment, Nigeria also receives capital from the U.S. and international organizations, such as the World Bank and the United Nations Development Programme. In a 2019 meeting with the United States' Treasury Secretary, President Buhari requested more capital from U.S. development finance institutions to upgrade infrastructure in Nigeria, as well as expressed interest in continued U.S. investment in Nigeria through the United States International Development Finance Corporation (USIDFC), a development bank formed by the US government to invest in developing nations. In last year’s G7 Summit, world leaders announced the Partnership for Global Infrastructure and Investment (PGII), with a goal of $600 billion in investments over the next five years to help address infrastructure gaps in developing countries. This was meant as an alternative to China’s Belt and Road Initiative, although time will tell whether Nigeria’s leadership will continue to lean towards China for infrastructure financing and implementation.
Crucial to the debate of Nigeria’s continuing ties with China is the new leadership in Nigeria. After the February 23, 2023 elections, Bola Tinubu emerged victorious and is set to take office in May, despite disputes over whether the election was truly free and fair. As Nigeria’s incoming president, Tinubu’s decisions will play a significant role in Nigeria’s place amidst U.S.-Sino tensions, as well as the new government’s response to infrastructure needs. Recently, Tinubu spoke of “connecting the nation through road, rail, bridges and ports,” mentioned the infrastructure gap, and made a bold claim that “-we shall build infrastructure that will endure through climate change and extreme weather.” Rising income and population will only increase demands for greater infrastructure and only time will tell whether and how Tinubu’s administration will take meaningful steps to address those demands.
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