US embassy cable - 05ABUJA1925

S E C R E T SECTION 01 OF 02 ABUJA 001925 
 
SIPDIS 
 
NOFORN 
 
DEPT FOR EAP/CM BILL CRANE 
DEPT FOR AF/RSA JOHN NAY 
 
E.O. 12958: DECL: 08/31/2015 
TAGS: EAID, ECON, PREL, MASS, EMIN, ENRG, ETRD, AF, CH 
SUBJECT: CHINA'S INFLUENCE IN NIGERIA 
 
REF: A. STATE 153199 
     B. 04 ABUJA 2051 
     C. ABUJA 1338 
     D. 04 ABUJA 149 
 
Classified By: Ambassador John Campbell for Reasons 1.4 (b) & (d). 
 
1.  Summary.  (U) The People's Republic of China (hereafter 
China) has been for some time expanding its economic and 
business activity in Nigeria.  Trade, energy, telecoms, and 
agriculture are the main areas of activity.  Military 
cooperation is also an important area of engagement, both 
with Nigeria and with the sub-regional organization ECOWAS. 
End Summary. 
 
ECONOMIC AND TRADE RELATIONS 
---------------------------- 
 
2.  (SBU) Chinese goods are entering and dominating some 
segments of the consumer market.  The two countries estimate 
their bilateral trade at $2 billion, with Nigeria importing 
$1.42 billion of Chinese goods in 2004, with Nigeria as 
China's second largest market on the continent. This is 
reportedly a five-fold increase in the last four years. 
Though China does little manufacturing in Nigeria, there is 
anecdotal evidence that Chinese firms are manufacturing 
pirated music and movie products in Nigeria, using Chinese 
labor. The U.S. Mission has reported in detail Chinese 
activity in Nigeria's booming telecommunications sector. 
China is participating in some joint agricultural projects, 
though so far they are mainly small pilot projects. 
 
3.  (SBU) The energy sector has seen most activity with 
Chinese firms becoming involved in developing oil blocks, and 
pledging investment in refining. In July 2005, the Chinese 
state-owned PetroChina company signed an $800 million 
agreement with the Nigerian National Petroleum Corp. to 
import 30,000 barrels of oil per day for five years. Firms 
have expressed intent to explore opportunities in power 
generation, coal processing and petrochemicals.  China is 
clearly interested in developing Nigeria as an energy 
supplier, and to some extent is willing to pay a premium, 
often in the form of agreeing to make additional investments 
in less attractive areas. It is not clear whether in the end 
those investments will actually materialize. There may be a 
limit to that premium. Chinese firms did not place any 
winning bids in the last oil block bid round, possibly, like 
Western oil majors, determining that the prices were too high 
for the presumed return.  There is little reason for China to 
pay a premium for general oil supplies. Oil is a commodity 
that in most circumstances can be acquired on the market at 
the prevailing price. With its extreme dependence on imports, 
however, China probably would be willing to pay a significant 
premium to secure supplies that would reliably be available 
in case the oil markets ceased to function normally. For now, 
Nigerian sources would seem to be of questionable 
deliverability in case of a global supply interruption. 
 
4.  (C) In pursuing its economic interest here, China is free 
to ignore human rights, democracy, and other issues which 
complicate the U.S. relationship. Still, while Chinese firms 
might have some advantages over western firms in terms of 
business practices, safety standards, and responsibility to 
shareholders, nonetheless they will be active here only to 
extent that there is an advantage. In fact, Chinese firms 
face most of the same problems as others in doing business in 
Nigeria.  The Standards Office of Nigeria recently said 90% 
of Chinese electrical goods failed to meet standards, and 
starting in October would be impounded upon import.  Kaduna 
refinery workers this month denied access to representatives 
of the company's new management, the China National Petroleum 
Company, citing labor issues. A Chinese company that won a 
contract to rehabilitate the Nigerian railway system has 
stopped work for some time, because it failed to receive a $ 
20 million payment. 
 
5.  (U) In reflecting China's growing commercial ties with 
Nigeria, the "West African United Business Weekly," Nigeria's 
first Chinese-language newspaper, began publication in August 
2005.  The newspaper is published in Lagos, Nigeria's 
commercial capital.  The newspaper's president said the 
publication will publish daily "when conditions are ripe." 
The number of Chinese residing in Nigeria has risen from 
10,000 "several years ago" to more than 50,000. 
 
Political and Military Relations 
-------------------------------- 
6.  (U)  Visits from senior Chinese officials to Nigeria, and 
of senior Nigerian officials (including President Obasanjo) 
to China occur on a regular basis.  Press reporting indicates 
that these visits focus mostly on economic and development 
assistance issues.  In October 2004, the Chinese announced 
that they would fund almost 600 boreholes in Nigeria (Ref B) 
following the visit of the Nigerian Minister of Water 
Resources to China.  (Note this compares to approximately 50 
boreholes funded by Mission per year. End Note.)  On 
September 30, at a reception for Chinese National Day, 
Nigeria's Minister for the Federal Capital Territory 
characterized China as Africa's "most important partner." 
7.  (C)  ECOWAS:  The Chinese Ambassador to Nigeria is 
accredited as an Observer to ECOWAS, and has been for some 
time (long before the US sought accreditation).  The Chinese 
have offered to provide support to a signal unit in the 
ECOWAS Standby Force (ESF).  Though they were invited to the 
recent Defense and Security donor coordination meeting at 
ECOWAS, they failed to send a representative.  The Chinese 
DATT has approached ECOWAS regarding support to the planned 
logistics depot, but has not yet given a specific commitment 
of support.  In his questions to ECOWAS, the DATT seemed most 
concerned about support pledged by other Asian nations and 
how China would fit into that mosaic. 
 
8.  (C) United Nations:  The Chinese Ambassador to Nigeria 
engaged the GON on UN Reform during the summer of 2005.  He 
shared some of his experiences with the US Ambassador (Ref 
C), and seemed open to cooperation with the USG, especially 
in light of Nigeria's position in the African Union. 
 
9.  (S/NF) Military:  The Chinese have 2 Brigadier 
General-level Defense Attaches in their Embassy in Abuja, and 
a Major-level assistant.  These are the senior, by rank, 
DATTs in Abuja.  China suspended its cooperation with DICON 
(Defense Industries Corporation of Nigeria) in 2004 (Ref D) 
after the GON failed to provide agreed upon funding.  Recent 
reports have emerged about Chinese plans to sell F-7 or F-8 
fighters to Nigeria to replace Nigeria's aging and 
non-operational fleet of MiG-21s.  Outside observers believe 
that Nigeria has chosen to buy new aircraft from China 
instead of rehabilitating the old aircraft because the 
opportunities for graft are far greater in buying new, 
especially from China. 
 
Comment 
------- 
 
11.  (C) Chinese trade and investment overall is probably a 
net plus to Nigeria, which desperately needs to expand both 
to develop its economy. Economic and business success, could 
however, transfer to increased political and military 
influence, that might not support U.S. goals here. 
CAMPBELL