China has offered Nigeria a $6 billion loan to fund infrastructure projects, the Minister of Foreign Affairs, Mr. Geoffrey Onyema, said yesterday in Beijing the Chinese capital.
“It is a credit that is on the table as soon as we identify the projects,” he told reporters travelling with President Muhammadu Buhari to China.
“It won’t need an agreement to be signed; it is just to identify the projects and we access it,” he said.
The confirmation by Onyema coincided with an agreement reached between Nigeria and China yesterday on a currency swap deal, as it looks for ways to shore up the naira and fund a record budget deficit, possibly by issuing yuan-denominated bonds in China, reported Reuters.
Nigeria is facing its worst economic crisis in decades as sinking oil prices eat into its foreign reserves and the naira weakens against other currencies.
Nigeria has been for months looking for sources to help plug a projected 2016 deficit of N2.2 trillion ($11.1 billion) as Buhari plans to triple capital spending in the 2016 fiscal year.
According to Reuters, during Buhari’s visit to Beijing, the Industrial and Commercial Bank of China Ltd (ICBC), the world’s biggest lender, and Nigeria’s central bank signed a deal on yuan transactions.
“It means that the renminbi (yuan) is free to flow among different banks in Nigeria, and the renminbi has been included in the foreign exchange reserves of Nigeria,” Lin Songtian, Director General of the African Affairs Department of China’s foreign ministry, told reporters.
The agreement was reached following a meeting between Buhari and Chinese President Xi Jinping.
The move comes after Finance Minister, Mrs. Kemi Adeosun, said on Saturday that Nigeria was looking at Chinese panda bonds – yuan-denominated bonds sold by overseas entities on the mainland – adding that they would be cheaper than Eurobonds.
Nigeria’s central bank has said it plans to diversify its foreign exchange reserves away from the dollar by switching a stockpile into yuan. It converted up to a tenth of its reserves into yuan five years ago.
Lin said a framework on currency swaps has been agreed with Nigeria, making it easier to settle trade deals in yuan. China has signed currency swap deals with countries ranging from Kazakhstan to Argentina as it promotes wider use of its yuan.
Beijing also signed agreements to develop infrastructure in Nigeria, part of a drive to deepen its ties with Africa. ICBC signed a $2 billion loan deal with Dangote Group, the company owned by Africa’s richest man, Aliko Dangote, to fund two cement plants it plans, he told Reuters.
China’s official Xinhua news agency cited President Xi as telling Buhari that there was huge potential for economic cooperation, naming oil refining and mining.
Aly Khan Satchu, a portfolio manager at Rich Management, said the deal would pave the way for panda bonds but this would not be enough to ease pressure on the naira.
Buhari has rejected calls to devalue the currency.
“Nigerian FX policy remains the elephant in the room and China or a panda bond is not going to be enough to stop what will eventually become a tsunami of a devaluation,” he said.
Towards this end, Buhari has directed that technical committees should be established immediately to finalise discussions on the new joint Nigeria/China rail, power, manufacturing, agriculture and solid mineral projects.
A statement by his spokesman, Mr Garba Shehu said the president gave the directive in Beijing yesterday after talks between his delegation and high-ranking Chinese government officials led by President Jinping.
The technical committees are to conclude their assignments before the end of next month.
Buhari had at the talks welcomed China’s readiness to assist Nigeria in her bid to rapidly industrialise and join the world’s major economies.
The statement said that President Jinping agreed that Nigeria’s chosen path of development through economic diversification was the best way to go.
To help Nigeria to achieve this, China promised to fully support the country through infrastructure development and capacity building.
China also expressed an interest in setting up major projects in Nigeria such as refineries, power plants, mining companies, textile manufacturing and food processing industries as soon as the enabling environment is provided by the federal government.
In response to Buhari’s desire to make Nigeria self-sufficient in food production, Jinping offered $15 million agricultural assistance to Nigeria for the establishment of 50 Agricultural Demonstration Farms across the country.
Shehu said China and Nigeria also agreed to strengthen military and civil service exchanges as part of a larger capacity-building engagement.
In line with this, China offered to raise its scholarship awards to Nigerian students from about 100 to 700 annually.
In addition, 1,000 other Nigerians are to be given vocational and technical training by China annually.
The statement said Jinping applauded the war against corruption being waged by Buhari.
The Chinese leader assured Buhari that Nigeria would always have a special place in the affairs of the Peoples Republic of China.
After the talks, Buhari and Jinping witnessed the signing of several agreements and memorandums of understanding (MoUs) by Nigeria and China.
The MoUs included a framework agreement between the Ministry of Trade and Investment and the National Development and Reform Commission of the Peoples Republic of China.
Others were an MoU on aviation cooperation between the Ministry of Transportation (Aviation) and the Ministry of Commerce of the Peoples Republic of China and an MoU between Nigeria and China on scientific and technological cooperation.
Meanwhile, Buhari yesterday in Beijing appealed to Chinese investors to consider citing industries in Nigeria instead of seeing the country as a market for dumping goods.
He called on the Nigerian and Chinese business communities to work harder to reduce the trade imbalance between both countries currently in China’s favour.
A statement issued yesterday from China by the president’s spokesman, Mr. Femi Adesina, said Buhari spoke at the opening of a Nigeria-China Business/Investment Forum.
Buhari said that trade and economic relations between both countries must be mutually beneficial and conducted with reciprocated respect and trust.
“Although the Nigerian and Chinese business communities have recorded tremendous successes in bilateral trade, there is a large trade imbalance in favour of China, as Chinese exports represent some 80 per cent of the total bilateral trade volume. This gap needs to be reduced.
“Therefore, I would like to challenge the business communities in both countries to work together to reduce the trade imbalance.
“You must also imbibe the spirit of having a mutually beneficial relationship in your business transactions. You must not see Nigeria as a consumer market alone, but as an investment destination where goods can be manufactured and consumed locally,” Buhari told the gathering.
The president said that his administration was committed to supporting investors that are ready to establish manufacturing and processing facilities in Nigeria.
“Last year during our meeting in New York, President Xi Jinping and I agreed to explore ways of practical cooperation in trade, investment, finance, human resources, agriculture and fishing.
“We also agreed to strengthen industrial capacity cooperation in the manufacture of cars, household appliances, construction materials, textiles, food processing, and others.
“This is in line with our government’s focus on import substitution through the creation of a diversified and inclusive economy that will meet most of our consumption needs.
“Already, our Federal Ministry of Industry, Trade and Investment is working on projects and programmes that will correct the wrongs of the past and enhance the ease of doing business in Nigeria.
“The ministry’s efforts will be complemented by investment tax incentive programmes, public sector reform initiatives, as well as our zero tolerance stance on corruption.
“We also have an aggressive but realistic infrastructure development programme that forms the backbone of our economic diversification policy. We are embarking on major power, road, rail, seaport and airport development programmes that will enhance the competitiveness of manufacturing businesses in Nigeria.
“The future is bright and I am very confident that our policies will make Nigeria the investment destination of your choice,” Buhari told the Chinese investors.
The president also assured them that his administration was doing everything possible to address concerns about security in Nigeria.
Buhari said that to consolidate on recent successes against Boko Haram, close to 20 per cent of the 2016 budgeted expenditure had been allocated to the Ministries of Defence and Interior as well as other security agencies.
“We are committed to protecting all lives and property within our borders. You can therefore be rest assured that your investments in Nigeria will be safe and secure,” he said.
Business and trade relations between Nigeria and China have grown astronomically in the last decade with bilateral trade volumes rising from $2.8 billion in 2005 to $14.9 billion in 2015.
Nigeria accounted for 8.3 per cent of the total trade volume between China and Africa and 42 per cent of the total trade volume between China and the Economic Community of West African States (ECOWAS) countries in 2015.
The efforts of the Buhari-led administration to diversify the nation’s economy away from oil also got a boost yesterday when an agreement that will herald one of the largest granite mining and processing plants in Africa was signed in Beijing between Shanghai Shibang Machinery Co. Limited (SBM) and a local company, Granite and Marble Limited.
The companies also signed an MoU to establish a plant for the assembly of mining equipment as well as supporting capacity building for the industry.
The signing ceremony was the highlight of the business forum on production capacity and investment cooperation organised as part of Buhari’s state visit to China.
The granite mining and processing plant is being supported with the special intervention fund of Central Bank of Nigeria (CBN) through Zenith Bank Plc.
Speaking at the signing ceremony, the board Chairman of SBM, Mr. Songke Yang, expressed optimism that with the commitment exhibited by Buhari during the forum, the plants should come on stream during the course of the year and promises to be a major player in the development of the nation’s solid minerals sector.
On his own part, the Chairman of Granite and Marble, Mr. Chiahemba Ayom, thanked the Ministers of Trade and Investment and Solid Minerals, as well as their agencies and the financial institutions for their immense support and encouragement in seeing the project through.