The relationship between a banker and a customer depends on the
activities; products or services provided by bank to its customers or
availed by the customer. Thus the relationship between a banker and
customer is the transactional relationship. Bank’s business depends much
on the strong bondage with the customer. “Trust” plays an important
role in building healthy relationship between a banker and customer.
Definition of a ‘BANKER’
The Banking Regulations Act (B R Act) 1949 does not define the term ‘banker’ but defines what banking is?
As per Sec.5 (b)
of the B R Act “Banking' means accepting, for the purpose of lending
or investment, of deposits of money from the public repayable on demand
or otherwise and withdrawable by cheque, draft, order or otherwise."
As per Sec. 3
of the Indian Negotiable Instruments Act 1881, the word “banker
includes any person acting as banker and any post office savings bank”.
According
to Sec. 2 of the Bill of Exchange Act, 1882, ‘banker includes a body of
persons, whether incorporated or not who carry on the business of
banking.’
Sec.5(c) of BR Act defines "banking
company" as a company that transacts the business of banking in India.
Since a banker or a banking company undertakes banking related
activities we can derive the meaning of banker or a banking company from
Sec 5(b) as a body corporate that:
(a) Accepts deposits from public.
(b) Lends or
(c) Invests the money so collected by way of deposits.
(d) Allows withdrawals of deposits on demand or by any other means.
Accepting
deposits from the ‘public’ means that a bank accepts deposits from
anyone who offers money for the purpose. Unless a person has an account
with the bank, it does not accept deposit. For depositing or borrowing
money there has to be an account relationship with the bank. A bank can
refuse to open an account for undesirable persons. It is banks right to
open an account. Reserve Bank of India has stipulated certain norms “Know Your Customer” (KYC) guidelines for opening account and banks have to strictly follow them.
In
addition to the activities mentioned in Sec.5 (b) of B R Act, banks can
also carry out activities mentioned in Sec. 6 of the Act.
Who is a ‘Customer’?
The
term Customer has not been defined by any act. The word ‘customer’ has
been derived from the word ‘custom’, which means a ‘habit or tendency’
to-do certain things in a regular or a particular manner’s .In terms of
Sec.131 of Negotiable Instrument Act, when a banker receives payment of a
crossed cheque in good faith and without negligence for a customer, the
bank does not incur any liability to the true owner of the cheque by
reason only of having received such payment. It obviously means that to
become a customer account relationship is must. Account relationship is a
contractual relationship.
It is generally believed that any
individual or an organisation, which conducts banking transactions with a
bank, is the customer of bank. However, there are many persons who do
utilize services of banks, but do not maintain any account with the
bank.
Thus bank customers can be categorized in to four broad categories as under:
(a)Those who maintain account relationship with banks i.e. Existing customers.
(b)Those who had account relationship with bank i.e. Former Customers
(c)Those who do not maintain any account relationship with the bank but frequently
visit branch of a bank for availing banking facilities such as for purchasing a
draft, encashing a cheque, etc. Technically they are not customers, as they do
not maintain any account with the bank branch.
(d)Prospective/ Potential customers: Those who intend to have account relationship
with the bank. A person will be deemed to be a 'customer' even if he had only
handed over the account opening form duly filled in and signed by him to the bank
and the bank has accepted the it for opening the account, even though no
account has actually been opened by the bank in its books or record.
The
practice followed by banks in the past was that for opening account
there has to be an initial deposit in cash. However the condition of
initial cash deposit for opening the account appears to have been
dispensed with the opening of ‘No Frill’ account by banks as per directives of Reserve Bank of India. ‘No Frill’ accounts are opened with ‘Nil’ or with meager balance.
The
term 'customer' is used only with respect to the branch, where the
account is maintained. He cannot be treated as a ‘customer' for other
branches of the same bank. However with the implementation of’ ‘Core
Banking Solution’ the customer is the customer of the bank and not of a
particular branch as he can operate his account from any branch of the
bank and from anywhere. In the event of arising any cause of action, the
customer is required to approach the branch with which it had opened
account and not with any other branch.
‘Know Your Customer’ Guidelines and Customer:
As per ‘Know Your Customer’ guidelines issued by Reserve Bank of India, customer has been defined as:
(i)A person or entity that maintains an account and/or has a business relationship
with the bank;
(ii)One on whose behalf the account is maintained (i.e. the beneficial owner);
(iii)Beneficiaries of transactions conducted by professional intermediaries, such as
Stock Brokers, Chartered Accountants, Solicitors etc. as permitted under the
law, and
(iv)Any person or entity connected with a financial transaction, which can pose
significant reputational or other risks to the bank, say, a wire transfer or
issue of a high value demand draft as a single transaction.
Banker-Customer Relationship:
Banking
is a trust-based relationship. There are numerous kinds of relationship
between the bank and the customer. The relationship between a banker
and a customer depends on the type of transaction. Thus the relationship
is based on contract, and on certain terms and conditions.
These
relationships confer certain rights and obligations both on the part of
the banker and on the customer. However, the personal relationship
between the bank and its customers is the long lasting relationship.
Some banks even say that they have generation-to-generation banking
relationship with their customers.The banker customer relationship is
fiducial relationship. The terms and conditions governing the
relationship is not be leaked by the banker to a third party.
Classification of Relationship:
The
relationship between a bank and its customers can be broadly
categorized in to General Relationship and Special Relationship.
If we look at Sec 5(b)
of Banking Regulation Act, we would notice that bank’s business hovers
around accepting of deposits for the purposes of lending. Thus the
relationship arising out of these two main activities are known as
General Relationship. In addition to these two activities banks also
undertake other activities mentioned in Sec.6 of Banking Regulation Act.
Relationship arising out of the activities mentioned in Sec.6 of the
act is termed as special relationship.
General Relationship:
Debtor-Creditor:
When a 'customer' opens an account with a bank, he fills in and signs
the account opening form. By signing the form he enters into an
agreement/contract with the bank. When customer deposits money in his
account the bank becomes a debtor of the customer and customer a
creditor. The money so deposited by customer becomes bank’s property and
bank has a right to use the money as it likes. The bank is not bound to
inform the depositor the manner of utilization of funds deposited by
him. Bank does not give any security to the depositor i.e. debtor. The
bank has borrowed money and it is only when the depositor demands,
banker pays. Bank’s position is quite different from normal debtors.
Banker
does not pay money on its own, as banker is not required to repay the
debt voluntarily. The demand is to be made at the branch where the
account exists and in a proper manner and during working days and
working hours.
The debtor has to follow the terms and conditions
of bank said to have been mentioned in the account opening form. {Though
the terms and conditions are not mentioned in the account opening form,
but the account opening form contains a declaration that the terms and
conditions have been read and understood or has been explained. In fact
the terms and conditions are mentioned in the passbook, which is issued
to the customer only after the account has been opened.}
In the
past while opening account some of the banks had the practice of giving a
printed handbill containing the terms and conditions of account along
with the account opening form. This practice has since been
discontinued. For convenience and information of prospective customers a
few banks have uploaded the account opening form, terms and conditions
for opening account, rate charge in respect of various services provided
by the bank etc., on their web site.
While issuing Demand Draft, Mail / Telegraphic Transfer, bank becomes a debtor as it owns money to the payee/ beneficiary.
2. Creditor–Debtor: Lending
money is the most important activities of a bank. The resources
mobilized by banks are utilized for lending operations. Customer who
borrows money from bank owns money to the bank. In the case of any
loan/advances account, the banker is the creditor and the customer is
the debtor. The relationship in the first case when a person deposits
money with the bank reverses when he borrows money from the bank.
Borrower executes documents and offer security to the bank before
utilizing the credit facility.
In addition to opening of a
deposit/loan account banks provide variety of services, which makes the
relationship more wide and complex. Depending upon the type of services
rendered and the nature of transaction, the banker acts as a bailee,
trustee, principal, agent, lessor, custodian etc.
Special Relationship:
1. Bank as a Trustee:
As per Sec. 3 of Indian Trust Act, 1882
‘
A "trust" is an obligation annexed to the ownership of property, and
arising out of a confidence reposed in and accepted by the owner, or
declared and accepted by him, for the benefit of another, or of another
and the owner.’ Thus trustee is the holder of property on behalf of a
beneficiary.
As per Sec. 15 of the ‘Indian
Trust Act, 1882 ‘A trustee is bound to deal with the trust-property as
carefully as a man of ordinary prudence would deal with such property if
it were his own; and, in the absence of a contract to the contrary, a
trustee so dealing is not responsible for the loss, destruction or
deterioration of the trust-property.’ A trustee has the right to
reimbursement of expenses (Sec.32 of Indian Trust Act.).
In case
of trust banker customer relationship is a special contract. When a
person entrusts valuable items with another person with an intention
that such items would be returned on demand to the keeper the
relationship becomes of a trustee and trustier. Customers keep certain
valuables or securities with the bank for safekeeping or deposits
certain money for a specific purpose (Escrow accounts) the banker in
such cases acts as a trustee. Banks charge fee for safekeeping valuables
2. Bailee – Bailor:
Sec.148 of Indian Contract Act, 1872, defines "Bailment" "bailor" and "bailee".
A "bailment" is the delivery of goods by one person to another for some purpose,
upon a contract that they shall, when the purpose is accomplished, be returned or
otherwise disposed of according to the directions of the person delivering them.
The person delivering the goods is called the "bailor". The person to whom they
are delivered is called, the "bailee".
Banks
secure their advances by obtaining tangible securities. In some cases
physical possession of securities goods (Pledge), valuables, bonds etc.,
are taken. While taking physical possession of securities the bank
becomes bailee and the customer bailor. Banks also keeps articles,
valuables, securities etc., of its customers in Safe Custody and acts as
a Bailee. As a bailee the bank is required to take care of the goods
bailed.
3.Lessor and Lessee:
Sec.105 of ‘Transfer of property Act 1882’ defines lease, Lessor, lessee, premium and rent. As per the section
“A
lease of immovable property is a transfer of a right to enjoy such
property, made for a certain time, express or implied, or in perpetuity,
in consideration of a price paid or promised, or of money, a share of
crops, service or any other thing of value, to be rendered periodically
or on specified occasions to the transferor by the transferee, who
accepts the transfer on such terms.”
Definition of Lessor, lessee, premium and rent :
(1)The transferor is called the lessor,
(2)The transferee is called the lessee,
(3)The price is called the premium, and
(4)The money, share, service or other thing to be so rendered is called the rent.”
Providing
safe deposit lockers is as an ancillary service provided by banks to
customers. While providing Safe Deposit Vault/locker facility to their
customers bank enters into an agreement with the customer. The
agreement is known as “Memorandum of letting” and attracts stamp duty.
The
relationship between the bank and the customer is that of lessor and
lessee. Banks lease (hire lockers to their customers) their immovable
property to the customer and give them the right to enjoy such property
during the specified period i.e. during the office/ banking hours and
charge rentals. Bank has the right to break-open the locker in case the
locker holder defaults in payment of rent. Banks do not assume any
liability or responsibility in case of any damage to the contents kept
in the locker. Banks do not insure the contents kept in the lockers by
customers.
4. Agent and Principal:
Sec.182 of
‘The Indian Contract Act, 1872’ defines “an agent” as a person employed
to do any act for another or to represent another in dealings with
third persons. The person for whom such act is done or who is so
represented is called “the Principal”.
Thus an agent is a person,
who acts for and on behalf of the principal and under the latter’s
express or implied authority and the acts done within such authority are
binding on his principal and, the principal is liable to the party for
the acts of the agent.
Banks collect cheques, bills, and makes
payment to various authorities viz., rent, telephone bills, insurance
premium etc., on behalf of customers. . Banks also abides by the
standing instructions given by its customers. In all such cases bank
acts as an agent of its customer, and charges for theses services. As
per Indian contract Act agent is entitled to charges. No charges are
levied in collection of local cheques through clearing house. Charges
are levied in only when the cheque is returned in the clearinghouse.
5. As a Custodian:
A custodian is a person who acts as a caretaker of some thing. Banks
take legal responsibility for a customer’s securities. While opening a
dmat account bank becomes a custodian.
6. As a Guarantor: Banks
give guarantee on behalf of their customers and enter in to their
shoes. Guarantee is a contingent contract. As per sec 31,of Indian
contract Act guarantee is a " contingent contract ". Contingent contract
is a contract to do or not to do something, if some event, collateral
to such contract, does or does not happen.
It would thus be observed that banker customer relationship is transactional relationship.
Termination of relationship between a banker and a customer:
The relationship between a bank and a customer ceases on:
(a) The death, insolvency, lunacy of the customer.
(b) The customer closing the account i.e. Voluntary termination
(c) Liquidation of the company
(d) The closing of the account by the bank after giving due notice.
(e) The completion of the contract or the specific transaction.
The relationship developed between a banker and customer involves some duties on the part of both.
Duties of a banker:
A 'Banker' has certain duties vis-à-vis his customer. These are:
(a)Duty to maintain secrecy/confidentiality of customers' accounts.
(b)Duty to honour cheques drawn by customers on their accounts and collect cheque,
bills on his behalf.
(c)Duty to pay bills etc., as per standing instructions of the customer.
(d)Duty to provide proper services.
(e)Duty to act as per the directions given by the customer. If directions are not
given the banker has to act according to how he is expected to act.
(f)Duty to submit periodical statements i.e. informing customers of the state of the
account
(g)Articles/items kept should not be released to a third party without due
authorization by the customer
Duty to maintain secrecy:
Banker
has a duty to maintain secrecy of customers' accounts. Maintaining
secrecy is not only a moral duty but bank is legally bound to keep the
affairs of the customer secret. The principle behind this duty is that
disclosure about the dealings of the customer to any unauthorized person
may harm the reputation of customer and the bank may be held liable.
The duty of maintaining secrecy does not cease with the closing of
account or on the death of the account holder.
As per Sec. 13 of “Banking Companies Acquisition and Transfer of Undertakings Act 1970”-
“Every
corresponding new bank shall observe, except as otherwise required by
law, the practices and usages customary among bankers, and, in
particular, it shall not divulge any information relating to or to the
affairs of its constituents except in circumstances in which it is, in
accordance with law or practices and usages customary among bankers,
necessary or appropriate for the corresponding new bank to divulge such
information.”
Maintaining secrecy is implied terms of the
contract with the customer which bank enters into with the customer at
the time of opening an account.
Bank has not only to maintain
secrecy of transactions, but secrecy is also to be maintained in respect
of operations through ATM/ debit cards. Bank has also to maintain
secrecy of user ID pins with due care so that it does fall in wrong
hands.
Failure to maintain secrecy:
Bank
is liable to pay damages to the account holder for loss of money and
reputation if it fails in its duty to maintain secrecy and discloses
information relating to a customer's account or conduct of the account
to any unauthorized person.
Bank can also be liable to the third
party if its wrongful disclosure harms the interest of the third-party.
If bank Knowingly furnishes wrong information
There has been a misrepresentation
Over estimation of favourable opinion
Circumstances under which banker can disclose information of customer's account:
A bank can disclose information regarding customer's account to a person(s) under the following circumstances.
(a)Under compulsion of law.
(b)Under banking practices.
(c)For protecting national interest.
(d)For protecting bank’s own interest
(e)Under express or implied consent of the customer
Disclosure under compulsion of law:
Banks
disclose information to various authorities who by virtue of powers
vested in them under provisions of various acts require banks to furnish
information about customer’s account. The information is called under:
(i)Section 4 of Banker's Book Evidence Act, 1891
(ii)Section 94 (3) of Code of Civil Procedure Act, 1908
(iii)Section 45 (B) of Reserve Bank of India Act, 1934
(iv)Section 26 of Banking Regulation Act, 1949
(v)Section 36 of Gift Tax Act, 1958
(vi)Sections 131, 133 of Income Tax Act, 1961
(vii)Section 29 of Industrial Development Bank of India Act, 1964
(viii)Section 12of Foreign Exchange Management Act, (FEMA) 1999
(ix)Section 12 of the Prevention of Money Laundering Act, 2002
Banks
are required to furnish only the called for information (no additional
information is to be furnished) on receipt of written request of the
person who is vested with the authority to call for such information
under the said acts. The customer is kept informed about the disclosure
of the information.
Disclosure under banking practices:
In
order to ascertain financial position and credit worthiness of the
person banks obtain information from other banks with which they are
maintaining accounts. It is an established practice among bankers and
implied consent of the customer is presumed to exist. The opinion is
given in strictest confidence and without responsibility on the part of
the bank furnishing such information. Credit information is furnished in
coded terms to other banks on IBA format and without signatures.
2.Duty to provide proper accounts :
Banks
are under duty bound to provide proper accounts to the customer of all
the transactions done by him. Bank is required to submit a statement of
accounts / passbook to the customer containing all the credits and
debits in the account.
3.Duty to honour cheques:
As
'banking' means accepting of deposits withdrawable by cheque, draft,
order or otherwise, the banker is duty bound to honour cheques issued by
the customers on their accounts.
Sec. 31of Negotiable Instruments
Act, 1881 specifies the liability of drawee of cheque. As per Sec. 31
“The drawee of a cheque having sufficient funds of the drawer in his
hands properly applicable to the payment of such cheque must pay the
cheque when duly required so to do, and, in. default of such payment,
must compensate the drawer for any loss or damage caused by such
default.”
Therefore it is the duty of a bank to honour the cheques issued by the account holder if:
The
cheque has been properly drawn and is in order in all respects i.e. it
is properly dated, amount in words and figures have been expressed
properly, is neither stale nor post dated nor mutilated and the
signature of accountholder tallies with the specimen recorded with the
bank. The cheque should be drawn on the branch where the account is
maintained. (Due to implementation of technology and core banking
solution a customer can present cheques on any branch of a bank. RBI has
advised banks to issue multi city cheques to account holders.)
(a)There is sufficient balance in the account and the balance is properly
applicable for payment of the cheque.
(b)The cheque is presented for payment on a working day and during the business
hours of the branch.
(c)Endorsements on the cheque are regular and proper.
(d)The payment of the cheque is not countermanded by the drawer
Duty to honour cheques ceases on receipt of:
(a)Stop payment instructions from the account holder.
(b)Notice about the death of the drawer.
(c)A garnishee order attaching the balance in the account or an income-tax
attachment order received by the banker.
(d)Drawer of the cheque becoming insolvent and/or a lunatic at the time of drawing
the cheque.
Bank can refuse to honour the cheques if:There is in sufficient 1balance in the account to make payment of the cheque.
Cheque issued does not pertain to the account on which it has been drawn.
1.If the cheque is not in order (post dated, stale, payment countermanded, amount in
words and figure differs, etc.)
2.The balances held in account are earmarked for some specific purpose and the
remaining balance is not sufficient to honour the cheque.
Rights of a banker:
It
is not that the bank has only duties to wards its customers, it too has
certain rights vis-à-vis his customers. The rights can broadly be
classified as:
Right of General Lien
a)Right of Set-Off
b)Right of Appropriation
c)Act as per the mandate of customer
d)Right to Charge Interest, Commission, Incidental Charges etc.
Lien:
A
lien is the right of a creditor in possession of goods, securities or
any other assets belonging to the debtor to retain them until the debt
is repaid, provided that there is no contract express or implied, to the
contrary. It is a right to retain possession of specific goods or
securities or other movables of which the ownership vests in some other
person and the possession can be retained till the owner discharges the
debt or obligation to the possessor. The creditor (bank) has the right
to maintain the security of the debtor but not to sell it. There are two
types of lien viz.
1.Particular Lien and
2.Right of General Lien
(a) Particular Lien:
A
'particular lien' gives the right to retain possession only of those
goods in respect of which the dues have arisen. It is also termed as
ordinary lien. If the bank has obtained a particular security for a
particular debt, then the banker's right gets converted into a
particular lien.
(b) Right of General Lien:
Banker
has a right of general lien against his borrower. General lien confers
banks right in respect of all dues and not for a particular due. It is a
statutory right of the bank and is available even in absence of an
agreement but it does not confer the right to pledge. A 'general lien'
gives the right to retain possession of any goods in the legal
possession of the creditor until the whole of the debt due from the
debtor is paid.
Section 171 of Indian Contract Act, 1872 confers
the right of general lien to banks. As per the section “ Bankers,
factors, wharfingers, attorneys of a High Court and policy-brokers may,
in the absence of a contract to the contrary, retain, as a security for a
general balance of account any goods bailed to them; but no other
persons have a right to retain, as a security for such balance, goods
bailed to them, unless there is an express contract to the effect.”
Bank
has a right of lien only when goods, securities are received in the
capacity as a creditor. While granting advances banks take documents.
These documents confer right to convert general lien as an implied
pledge. A banker’s lien is more than a general lien, it is an implied
pledge and he has the right to sell the goods in case of default Bank
has a 'Right of Sale' of goods under lien. Banker's right of lien is not
barred by the Law of Limitation.
Exercising Right of Lien:
Bank has the right of lien on goods and securities entrusted to him legally and standing in the name of the borrower.
Bank
can exercise right of lien on the securities in its possession for the
dues of the same borrower, even after the loan taken against that
particular security has been re-paid.
Right of lien can be exercised on bills, cheques, promissory notes, share certificates, bonds, debentures etc.
Where right of lien cannot be exercised:
Bank
cannot exercise right of lien on goods received for safe custody, goods
held in capacity as a trustee, or as an agent of the customer, SDV, or
left in bank by mistake
Right of set-off:
The
banker has the right to set off the accounts of its customer. It is a
statutory right available to a bank, to set off a debt owned to him by a
creditor from the credit balances held in other accounts of the
borrower. The right of set-off can be exercised only if there is no
agreement express or implied to the contrary. This right is applicable
in respect of dues that are due, are becoming due i.e. certain and not
contingent. It is not applicable on future debts. It is applicable in
respect of deposits that are due for payment.
The right of set
off enables bank to combine all kinds of credit and debit balances of a
customer for arriving at a net sum due.
The right is also
available for deposits kept in other branches of the same bank. The
right can be exercised after death, insolvency, and dissolution of a
company, after receipt of a garnishee/ attachment order .The right is
also available for time barred debts.
Deposits held in the name
of a guarantor cannot be set off to the debit balance in borrowers
account until a demand is made to the guarantor and his liability
becomes certain. Banks cannot set off the credit balance of customer's
personal account for a joint loan account of the customer with another
person unless both the joint accountholders are jointly and severally
liable. Banks exercise the Right of set off only after serving a notice
on the customer informing him that the bank is going to exercise the
right of set-off.
Automatic right of set off:
Depending
on the situation, sometimes the set off takes place automatically
without the permission from the customer. In the following events the
set off happens automatically i.e. without the permission from the
customer.
a)On the death of the customer,
b)On customer becoming insolvent.
c)On receipt of a Garnishee order on customer’s account by court.
d)On receipt of a notice of assignment of credit balance by the customer to the
banker.
e)On receipt of notice of second charge on the securities already charged to the
bank.
Conditions while exercising right of Set - Off:
a)The account should be in the sole name of the customer.
b)The amount of debts must be certain and measurable.
c)There should not be any agreement to the contrary
d)Funds should not be held in trust accounts
e)The right cannot be exercised in respect of future or contingent debts.
f)The banker has the right to exercise this right before a garnishee order is received by it.
Right of Appropriation:
It
is the right of the customers to direct his banker against which debt
(when more than one debt is outstanding) the payment made by him should
be appropriated. In case no such direction is given, the bank can
exercise its right of appropriation and apply it in payment of any debt.
Section 59,60 and 61 of Indian Contract Act, 1872 lays down the rules
of appropriation.
Sec.59.Application of payment where debt to be discharged is indicated: (i.e.– As per borrowers instructions)
Where
a debtor, owing several distinct debts to one person, makes a payment
to him, either with express intimation, or under circumstances implying
that the payment is to be applied to the discharge of some particular
debt, the payment, if accepted, must be applied accordingly.
Sec.60. Application of payment where debt to be discharged is not indicated: (i.e. in the absence of express or implied intention of debtor)
Sec.60
of the Indian Contract Act states that if the debtor does not intimate
or there is no circumstance of indicating how the payment is to be used,
the right of appropriation is vested in the creditor.
According
to the Act, “Where the debtor has omitted to intimate and there are no
other circumstances, indicating to which debt the payment is to be
applied, the creditor may apply it at his discretion to any lawful debt
actually due and payable to him from the debtor, whether its recovery is
or is not barred by the law in force for the time being as to the
limitation of suits.”
Sec.61.Application of payment where neither party appropriates.
Where
neither party makes any appropriation the payment shall be applied in
discharge of the debts in order of time, whether they are or are not
barred by the law in force for the time being as to the limitation of
suits. If the debts are of equal standing, the payment shall be applied
in discharge of each proportionally.
Unless there is an
agreement to the contrary, any payment made by a debtor is applied first
towards interest and thereafter towards principal. If a customer has
only one account and he deposits and withdraws money from it regularly,
the order in which the credit entry will set off the debit entry is in
the chronological order, this is known as Clayton’s rule.
Rule in Clayton’s case:
The
rule was laid down in famous Devayanas Vs. Noble. The rule applies to
running accounts like CC/ OD with debit balance. The rule states that
each withdrawal in a debit account is considered as a new loan and each
deposit as a repayment in that chronological order.
Banker's right to charge interest, commission, incidental charges etc. :
Banker
has an implied right to charge for services rendered and sold to a
customer. Bank charges interest on amount advanced, processing charges
for the advance, charges for non-utilization of credit facilities
sanctioned, charges commission, exchange, incidental charges etc.
depending on the terms and conditions of advance banks charge interest
at monthly, quarterly or semiannually or annually. Banks charge
customers if the balance in deposit account falls below the prescribed
amount. Usually the bank informs such charges to the customer by various
means.
Nomination Facility:
Nomination
is expression of wish of a person about transfer of his assets after
his death to a named person. Nomination is not a will but it serves the
purpose of will. In terms of Sections 45ZA to 45 ZF of the Banking
Regulation Act, 1949, Banking Companies (Nomination) Rules, 1985 have
been framed. Nomination facility simplifies the procedure for settlement
of claims of deceased depositors and locker holders. In an unfortunate
event of the death of a depositor, nomination enables the bank to make
payment to the nominee of a deceased depositor, of the amount standing
to the credit of the depositor, return the articles left by a deceased
person in the bank's safe custody to the nominee without asking for
succession certificate or verifying claims of legal heirs.
Nomination
does not take away the rights of legal heirs on the estate of the
deceased. The nominee receives the money from the bank as a trustee of
the legal heirs. In the case of a joint deposit account the nominee's
right arises only after the death of all the depositors. Nomination
facility is intended for individuals and sole proprietary concerns.
Where
the nominee is a minor, the depositor making the nomination appoints
any person to receive the amount of deposit in the event of his death
during the minority of the nominee. A person legally empowered to
operate a minor's account can file a nomination on behalf of the minor.
Nomination
can be made in account opening form itself or on a separate form
indicating the name and address of the nominee. The account holders can
change the nomination any time. There can be only one Nominee for a
deposit account whether held singly or jointly. There can be two
nominees for a jointly held locker.
Availability of the Nomination facility:
Nomination
facility is available for all types of bank deposits, safe deposit
lockers, and safe custody articles. This is also applicable to deposits
having operating instructions "Either or Survivor".
Nomination can be made in favour of one person only.
In case of a joint account, nomination is to be made by all depositors jointly.
Nomination
cannot be made in accounts where deposits are held in a representative
capacity e.g. trust accounts etc. and in accounts of partnership firms,
H.U.F., companies, associations, clubs etc.
Nomination can be made
in favour of a minor. However while making the nomination, the nominee
has to appoint another person (not a minor), to receive the amount of
the deposit on behalf of the nominee in the event of the death of the
depositor during the minority of the nominee. Date of birth of minor be
obtained and noted.
A nomination will continue to be in force even on renewal of term deposit, unless specifically cancelled or changed.
Banks obtain separate nomination form for each term deposit receipt
A non-resident can be nominated as a nominee in a resident account
In
case of non-resident nominees, the amount entitled to him from the
account(s)/ deposits(s) of a deceased person, will be credited to his
NRO account. The amount so credited cannot be remitted outside India.
Insurance of Bank Deposits:
The
Deposit Insurance and Credit Guarantee Corporation of India, a public
limited company promoted by Reserve Bank of India, insure bank deposits.
The authorised capital of the Corporation is Rs.50 crore, which is
fully issued and subscribed by the Reserve Bank of India (RBI). The
management of the Corporation vests in a Board of Directors of which a
Deputy Governor, Reserve bank of India, is the Chairman.
The
Corporation protects the interest of depositors and infuses confidence
by providing deposit insurance on account of failure of banks. All
commercial banks including the branches of foreign banks functioning in
India, local area banks, regional rural banks, all eligible co-operative
banks are covered under the Deposit Insurance Scheme. The insurance
covers the loss of all or part of their deposits in all branches of a
bank to a maximum of Rs.1, 00,000. It insures all deposits such as
savings, fixed, current, recurring, etc except the following types of
deposits.
(i) Deposits of foreign Governments,
(ii) Deposits of Central/State Governments,
(iii) Inter-bank deposits,
(iv) Deposits of the State Land Development Banks with the State co-operative bank;
(v) any amount due on account of and deposit received outside India
(vi) any amount, which has been specifically exempted by the corporation with the previous approval of Reserve Bank of India.
The
Corporation charges insurance premium from banks on deposits @10 paisa
per Rs.100of assessable deposits per annum. The premium is charged twice
a year on the assessable deposits as at 31st March and 30th September.
Though the premium is charged on the full amount of deposit kept by
depositors in a bank is insured up to a maximum of Rs.1,00,000 (Rupees
One Lakh) only for both principal and interest amount.
The
corporation pays to each depositor through the liquidator, the amount of
his deposit up to Rupees one lakh within two months from the date of
receipt of claim list from the liquidator. If a bank is reconstructed or
amalgamated / merged with another bank, it pays the bank concerned, the
difference between the full amount of deposit or the limit of insurance
cover in force at the time, whichever is less and the amount received
by him under the reconstruction / amalgamation scheme within two months
from the date of receipt of claim list from the transferee bank / Chief
Executive Officer of the insured bank/transferee bank as the case may
be.
In the second report of
Narasimham Committee (April 1998) on “Banking Sector Reforms”
recommendations have been made for reforming scheme of Deposit
insurance. The committee has recommended that instead of “flat’” rate
premium, it should be ‘ risk based’ or ‘variable rate’ premium.
Know Your Customer Norms and Cash transactions:
The
objective of KYC guidelines is to prevent banks from being used,
intentionally or unintentionally, by criminal elements for money
laundering activities. KYC procedures enable banks to know/understand
their customers and their financial dealings better, which in turn help
them, manage their risks prudently. Necessary checks before opening a
new account ensures that the identity of the customer does not match
with any person with known criminal background or with banned entities
such as individual terrorists or terrorist organizations etc. and that
no account is opened in anonymous or fictitious/ benami name(s).
Banks
are supposed to adopt due diligence and appropriate KYC norms at the
time of opening of accounts. The objectives of the KYC are to ensure
appropriate customer identification and to monitor transactions of a
suspicious nature. While opening an account a bank is supposed to obtain
all information necessary for establishing the identity/legal existence
of each new customer by taking and verifying the introductory reference
from an existing account holder/a person known to the bank or on the
basis of documents provided by the customer. The means of establishing
identity can be passport, driving license etc. In respect of existing
customers banks are required to complete customer identification at the
earliest.
Ceiling and monitoring of cash transactions
As per RBI guidelines issued under Section 35 (A) of the Banking Regulation Act, 1949:
(i)Banks
are required to issue travellers cheques, demand drafts, mail
transfers, and telegraphic transfers for Rs.50, 000 and above only by
debit to customers’ accounts or against cheques and not against cash.
While purchasing travellers cheques, demand drafts, mail transfers, and
telegraphic transfers for Rs.50, 000 and above purchaser has to mention
his Permanent Income Tax Account Number (PAN) on the application.
(ii)
The banks are required to keep a close watch of cash withdrawals and
deposits for Rs.10 lakhs and above in deposit, cash credit or overdraft
accounts and keep record of details of these large cash transactions in a
separate register. Branches of banks are required to report all cash
deposits and withdrawals of Rs.10 lakhs and above as well as
transactions of suspicious nature with full details in fortnightly
statements to their controlling offices.
Bankers’ Fair Practice Code:
Indian
Banks’ Association has prepared a code, which sets standards of fair
banking practices. This document is a broad framework under which the
rights of common depositors are recognized. It is a voluntary Code that
promotes competition and encourages market forces to achieve higher
operating standards for the benefit of customers. The Code applies to
current, savings and all other deposit accounts, collection and
remittance services offered by the banks, loans and overdrafts,
foreign-exchange services, card products and third party products
offered by banks.
Money-laundering:
The
concept of Money Laundering can be traced back to the "Hawala"
transactions. Hawala mechanism facilitates the conversion of black money
to white. Money laundering has become the centre of focus for criminals
and governments alike.
As per sec.3 of Prevention
of Money Laundering Act, 2002(PMLAct) money laundering has been defined
as an offence. The main objective of this Act is to prevent, combat and
control money laundering in India, and to confiscate, seize the property
obtained from the laundered money. Money laundering is defined as the
conversion of illegally acquired currency i.e. from drug trafficking,
terrorist activity or other serious crimes as appearing to have been
obtained from a legitimate source into legitimate funds. It is
disguising of illegally obtained financial assets.
Sec.12
of the PMLAct requires every banking company, financial institution and
intermediary to verify and maintain a record of all transactions of a
prescribed value and to furnish information whenever sought within a
prescribed time period. Under Section 35A of the Banking Regulation
Act, 1949, Reserve Bank of India has issued guidelines to banking
companies, financial institutions and intermediaries to maintain a
record of all transactions. The RBI has said that every bank should set
key indicators for accounts, taking note of the background of the
customer, such as the country of origin, sources of funds, the type of
transactions involved and other risk factors.
According to PML Act, 2002, whoever:
(a) Acquires, owns, possesses or transfer any proceeds of crime; or
(b) Knowingly enters into any transaction which is related to proceeds of crime either directly or indirectly; or
(c) Conceals or aids in the concealment of the proceeds of crime,
Thursday, August 4, 2011
Relationship between BOD, COD, TOC and ThOD
For a completely biodegradable wastewater such as
glucose, approximately ten percent of the original organics remain as
non-biodegradable cellular residues after biological oxidation. Hence,
the cellular residues are not measured by the BOD test. Therefore:
BODu = 0.9ThOD ---1
where BODu = ultimate BOD
ThOD = theoretical oxygen demand For domestic sewage and some
biodegradable industrial wastes, the relationship between BOD5 and BODu
is:
BOD5 = 0.77BODu ---2
where BOD5 = 5 day BOD BODu = ultimate BOD
For most wastewaters:
ThOD = COD ---3
where ThOD = theoretical oxygen demand
COD
= chemical oxygen demand since the COD test oxidizes all organics
except for those which are totally resistant to dichromate oxidation.
Stoichiometrically, the COD/TOC ratio should be approximately the molecular ratio of oxygen to carbon:
COD/TOC =32/12= 2.66 ---4
The
ratio will actually range from zero, when organic material is resistant
to dichromate oxidation, to as much as 6.0 when inorganic reducing
agents are present. For raw domestic sewage and some biodegradable industrial wastes, the following ratio of BOD5/TOC occurs:
BOD5/TOC =32/12(0.90)(0.77) = 1.85 ---5
where BOD5 = 5 day BOD TOC = Total Organic Carbon
0.90 = BOD5/BODu as per ---1
0.77 = BODu/ThOD as per ---2
As a wastewater is oxidized through a wastewater treatment plant, the BOD5/TOC ratio will drop. A treatment plant effluent may have a BOD5 /TOC ratio of as low as 0.5 since the effluent wastewater is so much less biodegradable. (It has already been largely degraded).
0.77 = BODu/ThOD as per ---2
As a wastewater is oxidized through a wastewater treatment plant, the BOD5/TOC ratio will drop. A treatment plant effluent may have a BOD5 /TOC ratio of as low as 0.5 since the effluent wastewater is so much less biodegradable. (It has already been largely degraded).
The BOD5 to COD ratio for domestic waste and certain biodegradable industrial wastes can be computed as follows:
BOD5 = 0.7 COD ---6
where BOD5 = 5 day BOD COD = chemical oxygen demand
0.7 = 1.85 /2.66
1.85 = BOD5/TOC as per --5 2.66 = COD/TOC as per --4
This ratio can also vary widely depending on the state of biodegradation of the wastewater. The author has found this ratio as low as 0.1 after several days of oxidation. If the BOD of a biodegradable wastewater equals zero, the wastewater will be completely biodegraded. There is some controversy about whether this ever occurs. Many authors will say that the Non-biodegradable Residue (NBDR) is as high as 0.10 as explained in the first paragraph of this section. The author has found that in activated sludge systems with hydraulic detention times in the range of 14 days, there is no accumulation of volatile suspended solids, which indicates that all organics are ultimately degraded under certain anoxic conditions.
This ratio can also vary widely depending on the state of biodegradation of the wastewater. The author has found this ratio as low as 0.1 after several days of oxidation. If the BOD of a biodegradable wastewater equals zero, the wastewater will be completely biodegraded. There is some controversy about whether this ever occurs. Many authors will say that the Non-biodegradable Residue (NBDR) is as high as 0.10 as explained in the first paragraph of this section. The author has found that in activated sludge systems with hydraulic detention times in the range of 14 days, there is no accumulation of volatile suspended solids, which indicates that all organics are ultimately degraded under certain anoxic conditions.
2 Responses to “Relationship between BOD, COD, TOC and ThOD”
Wednesday, May 25, 2011
The relationship between attitudes and behaviour
Once we've established people's attitudes, can we then accurately predict how they'll behave? Rosenberg & HovIand's (1960) three‑components model (The ABC model: affective – behavioural – cognitive) implies that the behavioural component will be highly correlated with the cognitive and affective components.
An early study which shows the inconsistency of attitudes and behaviour is that of LaPiere (1934).
LaPiere’s study
Beginning in 1930 and for the next two years, LaPiere travelled around the USA with a Chinese couple (a young student and his wife), expecting to encounter anti‑Oriental attitudes which would make it difficult for them to find accommodation. But in the course of 10,000 miles of travel, they were discriminated against only once and there appeared to be no prejudice. They were given accommodation in 66 hotels, auto‑camps and 'Tourist Homes' and refused at only one. They were also served in 184 restaurants and ca16 and treated with '... more than ordinary consideration ...'in 72 of them.
However, when each of the 251 establishments visited was sent a letter six months later asking: 'Will you accept members of the Chinese race as guests in your establishment?', 91 per cent of the 128 which responded gave an emphatic 'No'. One establishment gave an unqualified 'Yes' and the rest said 'Undecided: depends upon circumstances'.
Influences on behaviour
It's generally agreed that attitudes form only one determinant of behaviour. They represent predispositions to behave in particular ways, but how we actually act in a particular situation will depend on the immediate consequences of our behaviour, how we think others will evaluate our actions, and habitual ways of behaving in those kinds of situations. In addition, there may be specific situational factors influencing behaviour. For example, in the LaPiere study, the high quality of his Chinese friends' clothes and luggage and their politeness, together with the presence of LaPiere himself, may have made it more difficult to show overt prejudice. Thus, sometimes we experience a conflict of attitudes, and behaviour may represent a compromise between them.
Compatibility between attitudes and behaviour
The same attitude may be expressed in a variety of ways. For example, having a positive attitude towards the Labour Party doesn't necessarily mean that you actually become a member, or that you attend public meetings. But if you don't vote Labour in a general election, people may question your attitude. In other words, an attitude should predict behaviour to some extent, even if this is extremely limited and specific.
Indeed, Azjen & Fishbein (1977) argue that attitudes can predict behaviour, provided that both are assessed at the same level of generality. There needs to be a high degree of compatibility (or correspondence) between them. They argue that much of the earlier research (LaPiere's study included) suffered from either trying to predict specific behaviours from general attitudes, or vice versa, and this accounts for the generally low correlations. A study by Davidson and Jaccard tried to overcome this limitation.
Attitudes can predict behaviour if you ask the right questions (Davidson & Jaccard, 1979) Davidson and Jaccard analysed correlations between married women's attitudes towards birth control and their actual use of oral contraceptives during the two years following the study.
When 'attitude towards birth control' was used as the attitude measure, the correlation was 0.08. Clearly, the correspondence here was very low. But when 'attitudes towards oral contraceptives' were measured, the correlation rose to 0.32, and when 'attitudes towards using oral contraceptives' were measured, the correlation rose still further to 0.53. Finally, when 'attitudes towards using oral contraceptives during the next two years' was used, it rose still further, to 0.57. Clearly, in the last three cases, correspondence was much higher.
According to Ajzen and Fishbein, every single instance of behaviour involves four specific elements:
a specific action performed with respect to a given target in a given context at a given point in time.According to the principle of compatibility, measures of attitude and behaviour are compatible to the extent that the target, action, context and time element are assessed at identical levels of generality or specificity (Ajzen, 1988).
For example, a person's attitude towards a 'healthy lifestyle' only specifies the target, leaving the other three unspecified. A behavioural measure that would be compatible with this global attitude would have to aggregate a wide range of health behaviour across different contexts and times (Stroebe, 2000). Elaborating the psychological processes underlying the principle of compatibility, Ajzen (1996) suggested that to:
'... the extent that the beliefs salient at the time of attitude assessment are also salient when plans are formulated or executed, strong attitude‑behaviour correlations are expected'.
The reliability and consistency of behaviour
Many of the classic studies which failed to find an attitude‑behaviour relationship assessed just single instances of behaviour (Stroebe, 2000). As we noted earlier when discussing the LaPiere study, behaviour depends on many factors in addition to the attitude. This makes a single instance of behaviour an unreliable indicator of an attitude Jonas et al., 1995). Only by sampling many instances of the behaviour will the influence of specific factors 'cancel out'. This aggregation principle (Fishbein & Ajzen, 1974) has been demonstrated in a number of studies.
According to Hogg & Vaughan (1995), what has emerged in the 1980s and 1990s is a view that attitudes and overt behaviour aren't related in a simple one‑to‑one fashion. In order to predict someone's behaviour, it must be possible to account for the interaction between attitudes, beliefs and behavioural intentions, as well as how all of these connect with the later action. One attempt to formalise these links is the theory of reasoned action (TRA) (Ajzen & Fishbein, 1970; Fishbein & Ajzen, 1975). This is discussed in relation to health behaviour in Chapter 12.
The strength of attitudes
Most modern theories agree that attitudes are represented in memory, and that an attitude's accessibility can exert a strong influence on behaviour (Fazio, 1986: see Chapter 17). By definition, strong attitudes exert more influence over behaviour, because they can be automatically activated. One factor that seems to be important is direct experience. For example, Fazio & Zanna (1978) found that measures of students' attitudes towards psychology experiments were better predictors of their future participation if they'd already taken part in several experiments than if they'd only read about them. This can be explained by the mere exposure effect (Zajonc, 1968), according to which the more contact we have with something or somebody, the more we like them (see Chapter 28).
So attitudes don't predict behaviour: what's the problem? The so‑called attitude‑behaviour problem, that is, the failure to find a reliable relationship between attitudes and behaviour, threatened to undermine the entire study of attitudes. As we saw in the Introduction and overview, attitude research was a cornerstone of social psychology in general, and social cognition in particular, for much of their history (Stainton Rogers et al., 1995).
But from the perspective of discursive psychology, there's no reason to expect such a correlation: inconsistency between attitudes and behaviour is what we'd expect to find. Traditional, mainstream, attitude research is based on the fallacy of individualism (see Chapter 3), according to which attitudes 'belong' to individuals. This implies something fairly constant, and which is expressed and reflected in behaviour. From a discursive perspective, attitudes are versions of the world that are constructed by people in the course of their interactions with others.
Discursive psychology is concerned with action, as distinct from cognition. In saying or writing things, people are performing actions, whose nature can in revealed through a detailed study of the discourse (e.g. recordings of everyday conversations, newspaper articles, TV programmes). Social psychologists have underestimated the centrality of conflict in social life; an analysis of rhetoric highlights the point that people's versions of events, and their own mental life, are part of ongoing arguments, debates and dialogues (Billig, 1987, 1992, in Potter, 1996).
Compared with traditional attitude research, discursive psychology tries to shift the focus away from single, isolated, individuals towards interactions between individuals and groups, a more relational or distri
Quotes About The Relationship Between Animals And Humans
Heaven is by favor; if it were by merit your dog would go in and you would stay out. Of all the creatures ever made [man] is the most detestable. Of the entire brood, he is the only one... that possesses malice. He is the only creature that inflicts pain for sport, knowing it to be pain. ~Mark Twain
The question is not, "Can they reason?" nor, "Can they talk?" but rather, "Can they suffer?" ~Jeremy Bentham
If a group of beings from another planet were to land on Earth - beings who considered themselves as superior to you as you feel yourself to be to other animals - would you concede them the rights over you that you assume over other animals? ~Attributed to George Bernard Shaw Think occasionally of the suffering of which you spare yourself the sight. ~Albert Schweitzer
I had bought two male chimps from a primate colony in Holland. They lived next to each other in separate cages for several months before I used one as a [heart] donor. When we put him to sleep in his cage in preparation for the operation, he chattered and cried incessantly. We attached no significance to this, but it must have made a great impression on his companion, for when we removed the body to the operating room, the other chimp wept bitterly and was inconsolable for days. The incident made a deep impression on me. I vowed never again to experiment with such sensitive creatures. ~Christian Barnard, surgeon
Non-violence leads to the highest ethics, which is the goal of all evolution. Until we stop harming all other living beings, we are still savages. ~Thomas A. Edison
I care not much for a man's religion whose dog and cat are not the better for it. ~Abraham Lincoln God loved the birds and invented trees. Man loved the birds and invented cages. ~Jacques Deval, Afin de vivre bel et bien
We have enslaved the rest of the animal creation, and have treated our distant cousins in fur and feathers so badly that beyond doubt, if they were able to formulate a religion, they would depict the Devil in human form. ~William Ralph Inge, Outspoken Essays, 1922
From beasts we scorn as soulless, In forest, field and den, The cry goes up to witness The soullessness of men. ~M. Frida Hartley
People are more violently opposed to fur than leather because it's safer to harass rich women than motorcycle gangs. ~Author Unknown
Personally, I would not give a fig for any man's religion whose horse, cat and dog do not feel its benefits. Life in any form is our perpetual responsibility. ~S. Parkes Cadman -
Ever occur to you why some of us can be this much concerned with animals suffering? Because government is not. Why not? Animals don't vote. ~Paul Harvey
Support your right to arm bears. ~Cleveland Amory
Why should man expect his prayer for mercy to be heard by What is above him when he shows no mercy to what is under him? ~Pierre Troubetzkoy
Think occasionally of the suffering of which you spare yourself the sight. ~Albert Schweitzer
Cockfighting was illegal in Oklahoma until 1963, when a judge ruled that chickens are not animals and therefore unprotected by anticruelty laws. ~U.S. News & World Report, 6 December 1999
Animals give me more pleasure through the viewfinder of a camera than they ever did in the crosshairs of a gunsight. And after I've finished "shooting," my unharmed victims are still around for others to enjoy. I have developed a deep respect for animals. I consider them fellow living creatures with certain rights that should not be violated any more than those of humans. ~Jimmy Stewart
If we cut up beasts simply because they cannot prevent us and because we are backing our own side in the struggle for existence, it is only logical to cut up imbeciles, criminals, enemies, or capitalists for the same reasons. ~C.S. Lewis
People are more violently opposed to fur than leather because it's safer to harass rich women than motorcycle gangs. ~Author Unknown
Though boys throw stones at frogs in sport, the frogs do not die in sport, but in earnest. ~Bion, "Water and Land Animals," Plutarch
I abhor vivisection with my whole soul. All the scientific discoveries stained with innocent blood I count as of no consequence. ~Mahatma Gandhi
The squirrel that you kill in jest, dies in earnest. ~Henry David Thoreau
Drinking without being thirsty and making love at any time, Madame, are the only things that distinguish us from other animals. ~Pierre-Augustin Caron de Beaumarchais, The Marriage of Figaro, 1784, translated
I ask people why they have deer heads on their walls. They always say because it's such a beautiful animal. There you go. I think my mother is attractive, but I have photographs of her. ~Ellen DeGeneres
The fascination of shooting as a sport depends almost wholly on whether you are at the right or wrong end of a gun. ~P.G. Wodehouse
If you love animals called pets, why do you eat animals called dinner? ~As seen on a shirt at veganstore.com As often as Herman had witnessed the slaughter of animals and fish, he always had the same thought: in their behaviour toward creatures, all men were Nazis. The smugness with which man could do with other species as he pleased exemplified the most extreme racist theories, the principle that might is right. ~Isaac Bashevis Singer When I was twelve, I went hunting with my father and we shot a bird. He was laying there and something struck me. Why do we call this fun to kill this creature [who] was as happy as I was when I woke up this morning. ~Marv Levy
The woods were made for the hunters of dreams, The brooks for the fishers of song; To the hunters who hunt for the gunless game The streams and the woods belong. ~Sam Walter Foss
Animals can communicate quite well. And they do. And generally speaking, they are ignored. ~Alice Walker
Lisa: "Do we have any food that wasn't brutally slaughtered?" Homer: "Well, I think the veal died of loneliness." ~Matt Groening, The Simpsons
Cruelty must be whitewashed by a moral excuse, and pretense of reluctance. ~George Bernard Shaw
In an earlier stage of our development most human groups held to a tribal ethic. Members of the tribe were protected, but people of other tribes could be robbed or killed as one pleased. Gradually the circle of protection expanded, but as recently as 150 years ago we did not include blacks. So African human beings could be captured, shipped to America and sold. In Australia white settlers regarded Aborigines as a pest and hunted them down, much as kangaroos are hunted down today. Just as we have progressed beyond the blatantly racist ethic of the era of slavery and colonialism, so we must now progress beyond the speciesist ethic of the era of factory farming, of the use of animals as mere research tools, of whaling, seal hunting, kangaroo slaughter and the destruction of wilderness. We must take the final step in expanding the circle of ethics. ~Pete Singer
I abhor vivisection with my whole soul. All the scientific discoveries stained with innocent blood I count as of no consequence. ~Mahatma Gandhi Get a feel for fur: Slam your fingers in a car door. ~Anonymous, on the use of steel traps to capture fur-bearing animals, cited in Audubon, November 1990
Dogs are getting bigger, according to a leading dog manufacturer. ~Leo Rosten
Whether hunting is right or wrong, a spiritual experience, or an outlet for the killer instinct, one thing it is not is a sport. Sport is when individuals or teams compete against each other under equal circumstances to determine who is better at a given game or endeavor. Hunting will be a sport when deer, elk, bears, and ducks are... given 12-gauge shotguns. . ~R. Lerner, letter, Sierra, March-April 1991
Evolutionary biology is now uttering and seeking those forces that link us
with all those that have being. If we can discover the meaning in the trilling of a frog, perhaps we may understand why it is for us not merely noise but a song of poetry and emotion. ~Adrian Forsyth, A Natural History of Sex, 1986 Vivisection is a social evil because if it advances human knowledge, it does so at the expense of human character. ~George Bernard Shaw
I am not interested to know whether vivisection produces results that are profitable to the human race or doesn't.... The pain which it inflicts upon unconsenting animals is the basis of my enmity toward it, and it is to me sufficient justification of the enmity without looking further. ~Mark Twain The basis of all animal rights should be the Golden Rule: we should treat them as we would wish them to treat us, were any other species in our dominant position. ~Christine Stevens
When a man wants to murder a tiger he calls it sport; when the tiger wants to murder him he calls it ferocity. ~George Bernard Shaw
The animal shall not be measured by man. In a world older and more complete than ours, they move finished and complete, gifted with extension of the senses we have lost or never attained, living by voices we shall never hear. They are not brethren; they are not underlings; they are other nations, caught with ourselves in the net of life and time, fellow prisoners of the splendor and travail of the earth. ~Henry Beston, The Outermost House, 1928 I abhor vivisection with my whole soul. All the scientific discoveries stained with innocent blood I count as of no consequence. ~Mahatma Gandhi
I think animal testing is a terrible idea; they get all nervous and give the wrong answers. ~Author Unknown
Teaching a child not to step on a caterpillar is as valuable to the child as it is to the caterpillar. ~Bradley Millar
A Robin Redbreast in a cage Puts all Heaven in a Rage. ~William Blake, Auguries of Innocence
The human spirit is not dead. It lives on in secret.... It has come to believe that compassion, in which all ethics must take root, can only attain its full breadth and depth if it embraces all living creatures and does not limit itself to mankind. ~Albert Schweitzer, Novel Peace Prize address, "The Problem of Peace in the World Today"
People must have renounced, it seems to me, all natural intelligence to dare to advance that animals are but animated machines.... It appears to me, besides, that [such people] can never have observed with attention the character of animals, not to have distinguished among them the different voices of need, of suffering, of joy, of pain, of love, of anger, and of all their affections. It would be very strange that they should express so well what they could not feel. ~Voltaire, Traité sur la tolerance
To a man whose mind is free there is something even more intolerable in the sufferings of animals than in the sufferings of man. For with the latter it is at least admitted that suffering is evil and that the man who causes it is a criminal. But thousands of animals are uselessly butchered every day without a shadow of remorse. If any man were to refer to it, he would be thought ridiculous. And that is the unpardonable crime. ~Romain Rolland, Nobel Prize 1915
When it comes to having a central nervous system, and the ability to feel pain, hunger, and thirst, a rat is a pig is a dog is a boy. ~Ingrid Newkirk
Very little of the great cruelty shown by men can really be attributed to cruel instinct. Most of it comes from thoughtlessness or inherited habit. The roots of cruelty, therefore, are not so much strong as widespread. But the time must come when inhumanity protected by custom and thoughtlessness will succumb before humanity championed by thought. Let us work that this time may come. ~Albert Schweitzer
Because the heart beats under a covering of hair, of fur, feathers, or wings, it is, for that reason, to be of no account? ~Jean Paul Richter
Deliberate cruelty to our defenceless and beautiful little cousins is surely one of the meanest and most detestable vices of which a human being can be guilty. ~William Ralph Inge
The indifference, callousness and contempt that so many people exhibit toward animals is evil first because it results in great suffering in animals, and second because it results in an incalculably great impoverishment of the human spirit. All education should be directed toward the refinement of the individual's sensibilities in relation not only to one's fellow humans everywhere, but to all things whatsoever. ~Ashley Montague
I had bought two male chimps from a primate colony in Holland. They lived next to each other in separate cages for several months before I used one as a [heart] donor. When we put him to sleep in his cage in preparation for the operation, he chattered and cried incessantly. We attached no significance to this, but it must have made a great impression on his companion, for when we removed the body to the operating room, the other chimp wept bitterly and was inconsolable for days. The incident made a deep impression on me. I vowed never again to experiment with such sensitive creatures. ~Christian Barnard, surgeon
We must fight against the spirit of unconscious cruelty with which we treat the animals. Animals suffer as much as we do. True humanity does not allow us to impose such sufferings on them. It is our duty to make the whole world recognize it. Until we extend our circle of compassion to all living things, humanity will not find peace. ~Albert Schweitzer, The Philosophy of Civilization
If you have men who will exclude any of God's creatures from the shelter of compassion and pity, you will have men who will deal likewise with their fellow men. ~St. Francis of Assisi
The question is not, "Can they reason?" nor, "Can they talk?" but rather, "Can they suffer?" ~Jeremy Bentham
If a group of beings from another planet were to land on Earth - beings who considered themselves as superior to you as you feel yourself to be to other animals - would you concede them the rights over you that you assume over other animals? ~Attributed to George Bernard Shaw Think occasionally of the suffering of which you spare yourself the sight. ~Albert Schweitzer
I had bought two male chimps from a primate colony in Holland. They lived next to each other in separate cages for several months before I used one as a [heart] donor. When we put him to sleep in his cage in preparation for the operation, he chattered and cried incessantly. We attached no significance to this, but it must have made a great impression on his companion, for when we removed the body to the operating room, the other chimp wept bitterly and was inconsolable for days. The incident made a deep impression on me. I vowed never again to experiment with such sensitive creatures. ~Christian Barnard, surgeon
Non-violence leads to the highest ethics, which is the goal of all evolution. Until we stop harming all other living beings, we are still savages. ~Thomas A. Edison
I care not much for a man's religion whose dog and cat are not the better for it. ~Abraham Lincoln God loved the birds and invented trees. Man loved the birds and invented cages. ~Jacques Deval, Afin de vivre bel et bien
We have enslaved the rest of the animal creation, and have treated our distant cousins in fur and feathers so badly that beyond doubt, if they were able to formulate a religion, they would depict the Devil in human form. ~William Ralph Inge, Outspoken Essays, 1922
From beasts we scorn as soulless, In forest, field and den, The cry goes up to witness The soullessness of men. ~M. Frida Hartley
People are more violently opposed to fur than leather because it's safer to harass rich women than motorcycle gangs. ~Author Unknown
Personally, I would not give a fig for any man's religion whose horse, cat and dog do not feel its benefits. Life in any form is our perpetual responsibility. ~S. Parkes Cadman -
Ever occur to you why some of us can be this much concerned with animals suffering? Because government is not. Why not? Animals don't vote. ~Paul Harvey
Support your right to arm bears. ~Cleveland Amory
Why should man expect his prayer for mercy to be heard by What is above him when he shows no mercy to what is under him? ~Pierre Troubetzkoy
Think occasionally of the suffering of which you spare yourself the sight. ~Albert Schweitzer
Cockfighting was illegal in Oklahoma until 1963, when a judge ruled that chickens are not animals and therefore unprotected by anticruelty laws. ~U.S. News & World Report, 6 December 1999
Animals give me more pleasure through the viewfinder of a camera than they ever did in the crosshairs of a gunsight. And after I've finished "shooting," my unharmed victims are still around for others to enjoy. I have developed a deep respect for animals. I consider them fellow living creatures with certain rights that should not be violated any more than those of humans. ~Jimmy Stewart
If we cut up beasts simply because they cannot prevent us and because we are backing our own side in the struggle for existence, it is only logical to cut up imbeciles, criminals, enemies, or capitalists for the same reasons. ~C.S. Lewis
People are more violently opposed to fur than leather because it's safer to harass rich women than motorcycle gangs. ~Author Unknown
Though boys throw stones at frogs in sport, the frogs do not die in sport, but in earnest. ~Bion, "Water and Land Animals," Plutarch
I abhor vivisection with my whole soul. All the scientific discoveries stained with innocent blood I count as of no consequence. ~Mahatma Gandhi
The squirrel that you kill in jest, dies in earnest. ~Henry David Thoreau
Drinking without being thirsty and making love at any time, Madame, are the only things that distinguish us from other animals. ~Pierre-Augustin Caron de Beaumarchais, The Marriage of Figaro, 1784, translated
I ask people why they have deer heads on their walls. They always say because it's such a beautiful animal. There you go. I think my mother is attractive, but I have photographs of her. ~Ellen DeGeneres
The fascination of shooting as a sport depends almost wholly on whether you are at the right or wrong end of a gun. ~P.G. Wodehouse
If you love animals called pets, why do you eat animals called dinner? ~As seen on a shirt at veganstore.com As often as Herman had witnessed the slaughter of animals and fish, he always had the same thought: in their behaviour toward creatures, all men were Nazis. The smugness with which man could do with other species as he pleased exemplified the most extreme racist theories, the principle that might is right. ~Isaac Bashevis Singer When I was twelve, I went hunting with my father and we shot a bird. He was laying there and something struck me. Why do we call this fun to kill this creature [who] was as happy as I was when I woke up this morning. ~Marv Levy
The woods were made for the hunters of dreams, The brooks for the fishers of song; To the hunters who hunt for the gunless game The streams and the woods belong. ~Sam Walter Foss
Animals can communicate quite well. And they do. And generally speaking, they are ignored. ~Alice Walker
Lisa: "Do we have any food that wasn't brutally slaughtered?" Homer: "Well, I think the veal died of loneliness." ~Matt Groening, The Simpsons
Cruelty must be whitewashed by a moral excuse, and pretense of reluctance. ~George Bernard Shaw
In an earlier stage of our development most human groups held to a tribal ethic. Members of the tribe were protected, but people of other tribes could be robbed or killed as one pleased. Gradually the circle of protection expanded, but as recently as 150 years ago we did not include blacks. So African human beings could be captured, shipped to America and sold. In Australia white settlers regarded Aborigines as a pest and hunted them down, much as kangaroos are hunted down today. Just as we have progressed beyond the blatantly racist ethic of the era of slavery and colonialism, so we must now progress beyond the speciesist ethic of the era of factory farming, of the use of animals as mere research tools, of whaling, seal hunting, kangaroo slaughter and the destruction of wilderness. We must take the final step in expanding the circle of ethics. ~Pete Singer
I abhor vivisection with my whole soul. All the scientific discoveries stained with innocent blood I count as of no consequence. ~Mahatma Gandhi Get a feel for fur: Slam your fingers in a car door. ~Anonymous, on the use of steel traps to capture fur-bearing animals, cited in Audubon, November 1990
Dogs are getting bigger, according to a leading dog manufacturer. ~Leo Rosten
Whether hunting is right or wrong, a spiritual experience, or an outlet for the killer instinct, one thing it is not is a sport. Sport is when individuals or teams compete against each other under equal circumstances to determine who is better at a given game or endeavor. Hunting will be a sport when deer, elk, bears, and ducks are... given 12-gauge shotguns. . ~R. Lerner, letter, Sierra, March-April 1991
Evolutionary biology is now uttering and seeking those forces that link us
with all those that have being. If we can discover the meaning in the trilling of a frog, perhaps we may understand why it is for us not merely noise but a song of poetry and emotion. ~Adrian Forsyth, A Natural History of Sex, 1986 Vivisection is a social evil because if it advances human knowledge, it does so at the expense of human character. ~George Bernard Shaw
I am not interested to know whether vivisection produces results that are profitable to the human race or doesn't.... The pain which it inflicts upon unconsenting animals is the basis of my enmity toward it, and it is to me sufficient justification of the enmity without looking further. ~Mark Twain The basis of all animal rights should be the Golden Rule: we should treat them as we would wish them to treat us, were any other species in our dominant position. ~Christine Stevens
When a man wants to murder a tiger he calls it sport; when the tiger wants to murder him he calls it ferocity. ~George Bernard Shaw
The animal shall not be measured by man. In a world older and more complete than ours, they move finished and complete, gifted with extension of the senses we have lost or never attained, living by voices we shall never hear. They are not brethren; they are not underlings; they are other nations, caught with ourselves in the net of life and time, fellow prisoners of the splendor and travail of the earth. ~Henry Beston, The Outermost House, 1928 I abhor vivisection with my whole soul. All the scientific discoveries stained with innocent blood I count as of no consequence. ~Mahatma Gandhi
I think animal testing is a terrible idea; they get all nervous and give the wrong answers. ~Author Unknown
Teaching a child not to step on a caterpillar is as valuable to the child as it is to the caterpillar. ~Bradley Millar
A Robin Redbreast in a cage Puts all Heaven in a Rage. ~William Blake, Auguries of Innocence
The human spirit is not dead. It lives on in secret.... It has come to believe that compassion, in which all ethics must take root, can only attain its full breadth and depth if it embraces all living creatures and does not limit itself to mankind. ~Albert Schweitzer, Novel Peace Prize address, "The Problem of Peace in the World Today"
People must have renounced, it seems to me, all natural intelligence to dare to advance that animals are but animated machines.... It appears to me, besides, that [such people] can never have observed with attention the character of animals, not to have distinguished among them the different voices of need, of suffering, of joy, of pain, of love, of anger, and of all their affections. It would be very strange that they should express so well what they could not feel. ~Voltaire, Traité sur la tolerance
To a man whose mind is free there is something even more intolerable in the sufferings of animals than in the sufferings of man. For with the latter it is at least admitted that suffering is evil and that the man who causes it is a criminal. But thousands of animals are uselessly butchered every day without a shadow of remorse. If any man were to refer to it, he would be thought ridiculous. And that is the unpardonable crime. ~Romain Rolland, Nobel Prize 1915
When it comes to having a central nervous system, and the ability to feel pain, hunger, and thirst, a rat is a pig is a dog is a boy. ~Ingrid Newkirk
Very little of the great cruelty shown by men can really be attributed to cruel instinct. Most of it comes from thoughtlessness or inherited habit. The roots of cruelty, therefore, are not so much strong as widespread. But the time must come when inhumanity protected by custom and thoughtlessness will succumb before humanity championed by thought. Let us work that this time may come. ~Albert Schweitzer
Because the heart beats under a covering of hair, of fur, feathers, or wings, it is, for that reason, to be of no account? ~Jean Paul Richter
Deliberate cruelty to our defenceless and beautiful little cousins is surely one of the meanest and most detestable vices of which a human being can be guilty. ~William Ralph Inge
The indifference, callousness and contempt that so many people exhibit toward animals is evil first because it results in great suffering in animals, and second because it results in an incalculably great impoverishment of the human spirit. All education should be directed toward the refinement of the individual's sensibilities in relation not only to one's fellow humans everywhere, but to all things whatsoever. ~Ashley Montague
I had bought two male chimps from a primate colony in Holland. They lived next to each other in separate cages for several months before I used one as a [heart] donor. When we put him to sleep in his cage in preparation for the operation, he chattered and cried incessantly. We attached no significance to this, but it must have made a great impression on his companion, for when we removed the body to the operating room, the other chimp wept bitterly and was inconsolable for days. The incident made a deep impression on me. I vowed never again to experiment with such sensitive creatures. ~Christian Barnard, surgeon
We must fight against the spirit of unconscious cruelty with which we treat the animals. Animals suffer as much as we do. True humanity does not allow us to impose such sufferings on them. It is our duty to make the whole world recognize it. Until we extend our circle of compassion to all living things, humanity will not find peace. ~Albert Schweitzer, The Philosophy of Civilization
If you have men who will exclude any of God's creatures from the shelter of compassion and pity, you will have men who will deal likewise with their fellow men. ~St. Francis of Assisi
China‐Nigeria Economic Relations
[REVISED]
China‐Nigeria Economic
Relations
AERC Scoping Studies on China‐Africa Relations
E. Olawale OGUNKOLA
waleogunkola@yahoo.com
Abiodun S. BANKOLE
and
Adeolu ADEWUYI.
Department of Economics
and
Trade Policy Research and Training Programme (TPRTP)
University of Ibadan,
Ibadan, Nigeria
[Revised Report submitted to the African Economic Research Consortium (AERC),
February, 2008]
General Economic Background
Nigeria’s quest for development which has spanned some decades is yet to deliver on the ultimate
goal of poverty reduction, despite various plans, programmes, and projects. Analysis of
performance on poverty reduction strategy necessarily examines issues in growth and equity simply
because growth may be recorded without impacting on the poor. Indeed it is not impossible for
growth to have occurred at the expense of equity. Analysis of growth drivers on one hand has
identified several factors including macroeconomic environment, political and social environment
and investment gap. Some policies are required to attract foreign direct investment and to direct
such investment into appropriate sectors.
As a resource-rich country, Nigeria’s economic performance has been unfortunately driven by the
oil and gas sector to the extent that even progress recorded towards genuine economic development
prior to the discovery of oil in commercial quantity has been virtually eroded. In recent time (2000-
2005), the GDP growth was about 5.7% and the growth in the non-oil sector which contributed
about 5.9% of the GDP. However, the sector dominates the supply of foreign exchange and given
that the political economy of the country vested this important resource in the hand of the
government it also contributes a large chunk of government revenue.
The decline in the agricultural sector performance has been dramatic since the discovery of oil. The
manufacturing sector has not performed even better. A few statistics illustrate the poor performance
of the non-oil sector. The share of non-oil sector decreased from about 94% in 1970 to about 52%
in 2004. The decrease affected all the sectors (agriculture, industry, and services) but in different
magnitude. Agriculture GDP declined from about 41% to about 17% over the same period. The
decline in the services sector was from about 45% to about 27% during the period under review.
Nigeria’s non-oil sector is inefficiently servicing the domestic market as non-oil export is negligible
(about 1% of the GDP in 2005).
Table 1.1:
Structure of the Nigerian Economy, 1974-2004 (percent of GDP at current factor costs)
1970 1980 1990 2000 2003 2004
Oil sector GDP 6.0 29.1 39.3 48.2 44.6 48.2
Non-oil sector GDP 94.0 70.9 60.7 51.8 55.4 51.8
Agriculture 41.3 20.6 29.7 26.3 26.4 16.6
Industry 7.8 16.4 7.4 4.5 4.8 8.7
Services 45.0 33.8 23.6 21.0 24.2 26.5
Source: World Bank (2007)
It has also been recognized that sustainable development of the Nigerian economy rests the
diversification of the economy away from oil and gas to non-oil sector and this should be based on
the country’s abundant resources and comparative advantage. An analysis of constraints to the high
performance of the non-oil sectors identifies low productivity as a precursor to low private returns
and which in turn lead to low investment. Weak and unreliable infrastructure, macroeconomic
instability, microeconomic risks from corruption and weakness of institutions and regulations to
guide investment behaviour are the main constraints to high performance of the economy (World
Bank, 2007)1.
1 World Bank (2007), Nigeria: Competitiveness and Growth (Country Economic Memorandum)
- 2 -
Nigeria’s domestic market is vast but very small for modern day technology. Thus, there is the need
for seeking favourable external market at regional as well as at global level. Negotiations of the
trade agreements are expected to take these constraints into consideration. Indeed, for Nigeria
within-the border issues are relatively more important than seeking for more favourable market
access conditions. It is in this vein that aid-for-trade concept is more relevant to the country. A
critical element in enhancing the performance of non-oil sector as well as ensuring effective supply
response to market opening is investment in infrastructure which also in turn enhances private
investment. Thus, private investment and investment in the public sector of the economy is one of
the factors for ensuring sustainable development.
Hitherto, traditional development partners mainly from Europe and the Americas (U.S. A. and
Canada) have dominated trade, investment (in terms of foreign direct investment (FDI)) and grants
and financial as well as technical aid to the country. These are governed by various bilateral and
regional agreements that exist between these countries and Nigeria. Although Nigeria and these
countries have come a long way in their relationship, it is debateable if such has in any significant
way assist the country in its quest for development. The relationship appears to be exploitative at
least from the trend in the structure and pattern of trade and FDI inflow to the country. This is
based on the fact that oil and gas sector dominates the country’s exports to the tune of about 98%
and FDI inflows to the oil and gas sector accounted for about 40%.
Although Sino-Nigeria relationship dates back to more than three decades, recent developments call
for a careful and detailed analysis of this relationship and to this end, we seek to provide analysis of
the relationship with respect to investment, trade and aid: To what extent is China different from
other exploitative practices? What lessons can we learn from the past in order to make the
blossoming relationship produce win-win outcome?
In order to put the study in its proper perspective, Section II examines the cooperation
arrangements between Nigeria and China with specific focus on the diplomatic tie, technical
assistance, scientific cooperation, economic cooperation and cultural cooperation. Section III
presents an overview of investment relations with a view to determining its size, composition and
significance. Section IV is on trade relations. Export and import structures as well as the bilateral
balance of trade are examined. Section is an attempt at presenting information on aid flow from
China to Nigeria and Section VI concludes the report by revisiting the questions raised above.
II Cooperation arrangements
Recent developments in China and Nigeria relationship are not unconnected with the renewed ties
between the two giants. Although, China and Nigeria established diplomatic tie in 1972, the last
decade has witnessed unprecedented renewed positive and mutually beneficial developments.
Indeed between 1999 and 2006 diplomatic visits at the highest level were recorded: two visits in
each direction2 and various visits at other levels. All these visits, no doubt, are precursors to
2 Chinese leaders who visited Nigeria are as follows: Vice Premier Geng Biao (October 1978), Vice Premier Huang
Hua (November 1981), Vice Premier Tian Jiyun (November 1984), Vice Premier Wu Xueqian (March 1990), Vice
Premier and Foreign Minister Qian Qichen (January 1995), State Councilor and Secretary General of the State Council
Luo Gan (September 1996), Premier Li Peng (May 1997), Special Envoy of President Jiang Zeming, State Councilor
Ismail Amat (May 1999), Foreign Minister Tang Jiaxuan (January 2000), President Jiang Zemin (April 2002), and Vice
Chairman of the Standing Committee of the National Peoples Congress Han Qide (December 2003). China’s foreign
Minister, Li Zhaoxing (January, 2006), President Hu Jintao (April 2006)
- 3 -
developments in other facets of the relationship. Bilateral agreements are entered into in the process
some of which are listed in Table 1.2
Table1.2: Selected Agreements between Nigeria and China, 2001 to 2006
Type of Agreements Year
Agreement on Trade, Investment Promotion and Protection 2001
Agreement for the avoidance of double Taxation and Prevention of Fiscal Evasion with respect to Tax and
Income
2002
Agreement on Consular Affairs 2002
Agreement on Cooperation on Strengthening Management of narcotic Drugs, Psychotropic Substances and
diversion of Precursor Chemical
2002
Agreement on Tourist Cooperation 2002
Strategic Partnership Agreement 2005
A memorandum of Understanding on Investment Cooperation between the Federal Ministry of Commerce
of Nigeria and Ministry of Commerce of India
2006
Economic Cooperation Agreement between Nigeria and Xinguang International Group of China 2006
Source: Authors’ compilation
On diplomatic relations, various exchanges of visits and signed agreements and many Memoranda
of Understanding (MOUs) are indicative of the cordial relationship. Besides agreement on consular
affairs and strategic partnership agreement featuring mutual political trust, mutual economic benefit
and mutual support in international affairs have been signed. Various technical assistance in the
military, education and health, and technology have been received from Nigeria. For example an
aid of 46 million Yuan to Nigeria for the purpose of purchases of anti-malaria medicines and for
training of Nigerian health personnel on malaria control and prevention was granted by China.
Scientific cooperation between the two countries is also experiencing a boom. The relationship in
this area has witnessed the launching of NIGERCOMSTAT 1, Nigeria’s first communication
satellite in early 2007. An MOU on the Provision of National Information Communication
Technology Infrastructure Backbone between the Federal Ministry of Science and Technology and
Huawei Technologies was signed. Increase in economic cooperation is noticed both in trade and
investment both at public and private levels. Renewed cultural cooperation also manifests in
various areas. For example, some institutions of higher learning in Nigeria3 are collaborating with
their Chinese counterparts in the area of Chinese culture, innovation, while cultural troupes and
students are being exchanged.
The cooperation arrangements between China and Nigeria on different fronts a briefly examined in
the preceding paragraphs. Apart from providing alternatives to the traditional focus of government
such arrangements opened a new vista for other stakeholders.
The recent waves of diplomatic relations appear to a reasonable extent mutually beneficial. The
Nigerian was indeed on an aggressive campaign for FDI and Chinese government was also seeking
for markets for inputs especially raw materials as well as markets for finished products. While the
diplomatic relationship provides and generates general guidelines in terms of agreements, protocols
and Memorandum of Understanding; the cost-benefit analysis of the cooperation arrangements
Leaders of Nigeria who visited China are as follows: Head of State, Gen. Yakubu Gowon (September 1974), Vice-
President Dr. Alex I. Ekwueme (March 1983), Chief of the Army Staff Gen. Ibrahim Babangida (September 1984),
Chief of the Army Staff Gen. Sani Abacha (October 1989), Chief of the Defense Staff, General Abdulsalami Abubakar
(July 1997), President Olusegun Obasanjo (April 1999, August 2001 and 2005), President of Senate Anyim (December
2001), Vice President Abubakar (July 2002), and Deputy Speaker Nwuche of the National Assembly (July 2002).
3 Federal Polytechnic, Offa and Nnamdi Azikwe University are currently involved.
- 4 -
depend on several factors including the level of implementation, domestic rules, regulations and
institutional arrangements.
Nigeria stands to gain from technical assistance and scientific cooperation given China’s
advancement in these areas. A well known fact is that Nigerian military have benefited from
China’s technical assistance form of military training and even supply of military hardware. Health
personnel and different categories of patients patronizing public health providers are the main
beneficiaries of technical assistance offered by China mainly in the roll-back malaria programme.
Nigerian academia have also benefited from the cooperation arrangement between Nigeria and
China especially in the area of exchange programmes and promotion of the different culture.
III. Investment Relations
Positive developments have been recently recorded in the net FDI as it has doubled from US$3
billion in 2003 to more than US$6 billion in 2005. The share of the oil and gas sector was about 75
percent. The developments in the non-oil FDI is also significant as this component increased from
about $0.3 billion in 2003 to about $1.7 billion in 2005. Three related types of efforts explain the
observed positive developments: change in FDI regime; second, privatization programme of the
government; and third, the aggressive drive of government in attracting FDI into the country. The
recent developments notwithstanding, there is a huge investment gap in the development of the
Nigerian economy and the required investment can only be expected after the investment climate
has improved.
Our approach in this section is to review Chinese investment in Nigeria with a view to describing
its size, composition and significance. Data permitting the analysis would cover the relative size of
Chinese FDI compared to other sources of FDI, and the composition of the Chinese FDI with a
view to revealing relative sectoral preferences. This is necessary in order to characterize the nature
of investment and consequently assist in drawing inferences on the possible benefits of such
activities to the host country: Nigeria.
Trend in Chinese FDI inflow to Nigeria
Available information points to a general upward trend in the inflow of FDI from China to Nigeria.
Table 2.1 presents a global picture of FDI inflow to Nigeria from different regions and China from
1999 to 2006. All the regions showed significant increase in FDI inflow from the 1999 level. Thus,
the upward increase in the aggregate FDI flows to Nigeria from about $190.61 million in 1999 to
about $4169.14 million in 2006 is a joint increase in the levels of FDI by all the regions.
Table 2.1: Foreign Direct Investment in Nigeria, 1999-2006, $ Million
Region/Country 1999 2000 2001 2002 2003 2004 2005 2006
North America 7.35 9.84 12.10 36.16 40.34 4354.14 5166.32 1601.28
South America 1.15 2.96 0.39 0.05 7.14 60.04 24.56 11.76
Asia/Pacific 2.94 5.93 4.45 5.17 1.54 32.12 47.29 39.63
China 0.02 1.08 2.39 0.0 0.05 0.51 1.88 5.50
Middle/Far East 7.41 2.75 10.92 5.30 6.74 23.27 21.22 13.39
Europe 164.95 136.46 98.86 200.24 293.66 2624.30 3084.68 2441.52
Africa 6.79 9.45 8.24 24.30 91.41 173.62 169.04 56.06
190.61 168.47 137.35 271.22 440.88 7268.00 8514.99 4169.14
Source: Based on data from Nigerian Investment Promotion Commission (NIPC)
- 5 -
Relative to other regions, South American region contributed the least to the level of FDI inflow to
Nigeria. This was followed by the Asia-Pacific region. By 2006, though the relative positions
remained unchanged as the South America maintained its position, FDI inflows from Asia Pacific
region have surpassed the inflows from the Middle and Far East region. Thus, between 1999 and
2006, FDI inflows from Asia- Pacific region to Nigeria increased at a higher rate than their similar
inflows from the Middle and Far East region. This suggests increasing importance of China in the
observed trend. A further analysis of inflow of FDI from this region revealed that although China
ranked 5th in the magnitude of FDI in flows from the region to Nigeria behind India, Singapore,
Hong Kong, and Japan in that order, the country seems set to overtake these leading countries. This
is not farfetched given that Chinese FDI inflows to Nigeria increased from an average of $0.55
million in 1999-2000 to about $5.5 million in 2006. This is a tenfold increase compared to 9-fold
increase by the region as a whole.
Composition of Chinese FDI in Nigeria
Although, information about Chinese activities in the country points to increasing economic (trade,
commerce and investment), social (health and education) and technical relation, the composition of
Chinese FDI into Nigeria is fragmented. According to a source: China has set up over 30 solely
owned companies or joint venture in Nigeria actively involved in the construction, oil and gas,
technology, services and education sectors of the Nigerian economy. Indeed the increased Chinese
economic interests in Nigeria can be broadly classified into two: private and public. According to
information obtained from the Nigerian Investment Promotion Commission (NIPC), Chinese
private FDI is composed of agro-allied industry, manufacturing and communications sectors. On
one hand, some of these investments are joint venture mainly between Chinese and Nigerian
investors4. On the other hand, some are wholly foreign owned either wholly by the Chinese5 or in
partnership with other foreign investors.6 Some of the Chinese investments have also benefited
from investment incentives in the country such as pioneer status and expatriate quotas have been
granted to some of these companies (see Table 2.2).
Thus in 2005, the official record by Nigeria was $1.88 million FDI inflow from China. This seems
to be at variance with the impression created in the media. Various explanations can be adduced for
the seemingly paucity of observed figure: First, the upsurge in Chinese FDI inflow to Nigeria
occurred only in the recent time i.e. between 2006 and 2008, a period that is not covered by the
available data. Second, there is also the possibility that the promises and declarations captured by
the media did not eventually materialised. A case in point is the sales of Kaduna Refinery that was
announced in January 2006. It was meant to be a $2.3 billion worth of investment by the Chinese
state controlled energy company, CNOOC. By March 2007, the government was considering a
review of the deal.
The “public” investment and economic activities of Chinese in Nigeria have also gained
prominence in recent time. This is not unexpected given the high profile witnessed at the political
level (see the introduction to this study). This type of investment spanned different areas of the
Nigerian economy and prominent among them are those in oil and gas, construction especially
building of infrastructure. Table 2.3 lists some of the Chinese investments and projects in Nigeria.
There is the need to distinguish between investment, loan and contracts. This, however, requires
further insight to data. Currently available data do not offer sufficient information. For example, a
4 See table 2.2, Firm number 1
5 See table 2.2, Firms number 2 to 4
6 See table 2.2, Firm number 5
- 6 -
further probing of the deal to refurbish the Nigerian railways by the Chinese reveals that it has a
soft loan component.
FDI has a host of advantages including augmentation of domestic capital; transfer of technology,
knowledge and skills; promotion of competition and innovation; and enhancing export
performance. These must be weighed against other issues such as anti-competitive and restrictive
business practices; tax avoidance and abusive transfer pricing; volatile flows of investment and
related payments deleterious for balance of payments; transfer of polluting activities and
technologies; and excessive influence on economic affairs with possible negative effects on
industrial development and national security.
Table 2.2: Some Characteristics of Chinese Companies listed in 2005
Company
Name
Origin Nature of Business Nature of
Investment7
Level of
Investment
Employment
Generation
Happy Chef
Restaurant Ltd
Chinese &
Nigerians
Foods and Restaurant Business JV N20million 35
Plas Alliance
Company Ltd.
Chinese Manufacturing of Rubber Bags & Shoes WFO N75million 170
Royal Motors
Company Ltd
Chinese Assembling of Motorcycles WFO N10 million 1000
Sun Lung
Industries (Nigeria)
Ltd
Chinese Manufacture, import, and distribution of
all types of telecommunication, electronic
goods, telecomm materials, instrument,
musical instruments,
WFO N20 Million 75
ZTE Nigeria
Investment Ltd
1 Chinese
1Australian
Production, Sales, Services, Investment
related to Telecommunications
WFO N5 Million 136
Source: NIPC
A country desirous of hosting FDI must of necessity institute policies aimed at maximizing the
direct and indirect benefits as well as in minimizing the possible negative impacts. A litmus test for
gauging the motive of FDI is to classify such investments into resource-seeking, market-seeking or
efficiency-seeking. Efficiency-seeking FDI is preferred to other forms at least from the perspective
of the host country. However, for a country to attract efficiency-seeking type of FDI
macroeconomic stability must be ensured and distinct, predictable and easy-to-access policy
environment including incentives must be instituted.
Giving the list of private FDI and the sectoral concentration, efficiency motive may not be the
driving force of inflow of Chinese FDI in the Nigerian economy. From the list of public FDI,
resource-seeking motive cannot be ruled out. However, there are other categories of FDI that
cannot neatly fit into resource-seeking class. These include those in the area of building
infrastructure.
A veritable channel for optimal benefit is in the involvement of indigenous entrepreneurs in the
affairs of the particular firm. A joint venture has higher potential of positive impact in the host
economy. Beyond, the involvement of indigenous entrepreneurs at the management level, local
expertise and other work force are the channels through which technology is transferred and
technological capacity is developed.
Chinese firms in Nigeria have been criticized for being “closed” as they hardly employ local
experts. There are even submission that they mal-treat their workers. According to a report, the
7 JV = Joint Venture, WFO = Wholly Foreign Owned
- 7 -
conditions of employment of Nigerians in Chinese firms neither conform with the Nigeria Labour
Laws nor to that of the International Labour Organisation (ILO). The Report also alleged that
technology transfer from Chinese FDI is insignificant because most of the Chinese firms bring into
the country finished products and complete equipment with Chinese technicians. In a nutshell the
expected benefits may not be realized. The lesson is for the country not only to design appropriate
policies and regulations but also to ensure that these are implemented.
Although some of the Chinese investments are in critical areas of the Nigerian economy especially
in infrastructure (telecommunications, water, electricity, housing, etc.) hence they have high social
contents. However, there are reservations about the activities of Chinese investors especially those
who are engaged in manufacturing. Such complaints include sharp practices such as importation
and production of sub standard products, and lack of respect for their workers.
However, the quest for oil and gas by the Chinese seems to be of importance in the resurgence of
the current wave of relations. Consequently, Chinese nationals are not immune from the spate of
social unrest in the Niger Delta (the area where oil and gas are located in Nigeria). Some of the
Chinese oil workers were recently abducted by militants who are agitating for a more equitable
distribution of resources in the country.
Table 2.3: Some of the Chinese Investment and Projects in Nigeria
Description Value
China National Overseas Oil Company Limited8 (CNOOC) 45% stake in OPL 246 in Offshore
deepwater oil field
$2.7 billion
Controlling shares in Kaduna Refinery
Modernisation of Nigeria’s one-track rail to standard gauge rail (Note: China has loaned Nigeria
$2.5 billion to finance the refurbishment of the railway system
$8.3 billion (1st
phase)
Financial support to Reliance Telecommunications Ltd. (RelTel) by China’s Development Bank
facilitated by Huawei Technologies
$20 million
Huawei equipment agreement with GV Telecoms/Prestel $250 million
III. Trade Relations
Size, Composition and Significance of Exports to China
Nigeria’s exports to China are spread over many and varied products which have been classified
according to the Standard International Trade Classification Revision 3 (SITC Rev. 3) shown on
Table 3.1. These products include food, animals, crude materials, oils, chemical products, and
manufactured products. Though the source of data did not show data on Nigeria’s exports to China
in 1995, data were recorded for 2000 and 2005. In 2000, four broad commodities were exported
totaling US$307.3 million, with the main export commodity being Mineral fuel and lubricants
which represented US$273.7 million. The next important export in 2000 was crude materials
excluding food and fuel which totaled US$33.3 million. The remaining two broad commodities
exported to China were quite insignificant with values between US$0.1 million and US$0.2
million. Thus, in terms of Nigeria’s exports to China, Mineral fuel and lubricants ranked first,
followed by crude materials excluding food and fuel. Beverages and live animals exports rank third
8 CNOOC is one of the four big oil companies created when China’s oil industry was restructured seven years ago.
Cited in BusinessDay Africa, January 16 2006.
- 8 -
while manufactured goods rank fourth. In terms of significance of Nigeria’s exports to China
relative to the world, Nigeria exported more crude materials excluding food and fuel to China as
this constituted 61.1%. Mineral Fuel and lubricants which constituted the main exports of Nigeria
to China in 2000 was a paltry 1.4% of Nigeria’s total world exports. In effect, out of US$20.3
billion total Nigeria’s exports, only 1.5% was exported to China.
Nigeria’s exports position was more impressive in 2005. The country’s exports more than doubled
the value in 2000; this accounted for by all the products, from US$20.3 billion in 2000 to
US$44.4billion in 2005. In contrast, though exports to China increased to US$526.9 million in
2005, the increase was not as much as that of Nigeria’s total exports. The composition of exports to
China in 2005 was not very different from that of 2000 but experienced some repositioning of
certain broad products. Thus, mineral fuel and lubricants still ranked first followed in ranking by
crude materials excluding food and fuel. However, manufactured goods, which ranked last in 2000,
displaced food and live animals while two broad products; chemicals, and miscellaneous
manufactures, featured in 2005. Also, exports of crude materials excluding food and fuel reduced
between 2000 and 2005. The proportion of Nigeria’s exports destined for China reduced in 2005
even when the absolute value showed an increase. Nigeria’s export to China in 2005 was 1.2% of
its total exports which represented a reduction compared to 2000. The export destinations appeared
to have been more fairly diversified in 2005, as areas where exports to China was dominant, such as
crude materials excluding food and fuel, became insignificant while China gained positions in such
other areas as food and live animals, chemicals, manufactured goods and miscellaneous
manufactures. In other words, even though Nigeria’s exports to China relative to the rest of the
world dwindled in 2005, Nigeria exported more varieties of products to China compared to earlier
periods.
In effect, producers and exporters of those broad categories of products whose exports increased
between 2000 and 2005 are better off as they earned additional incomes. These include producers
and exporters of food and live animals, mineral fuel/lubricants, chemicals, manufactured goods,
and miscellaneous manufactures. Nigerian producers and exporters of crude materials excluding
food and fuel lost export market share in China and thus were worse off in 2005.
Table 3.1: China’s Share of Nigeria’s Exports (US$ million)
1995 2000 2005 1995 2000 2005
Rev. 3 World China World China World China
China’s Share of
Nigeria’s Imports
0 Food & live animals 293.9 0.0 205.4 0.2 592.6 1.8 0.0 0.1 0.3
1 Beverages and tobacco 1.7 0.0 1.3 0.0 3.9 0.0 0.0 0.0 0.0
2 Crude mater.ex food/fuel 262.4 0.0 54.5 33.3 304.0 12.6 0.0 61.1 4.1
3 Mineral fuel/lubricants 11189.8 0.0 19950.5 273.7 43054.7 503.9 0.0 1.4 1.2
4 Animal/veg oil/fat/wax 0.1 0.0 2.6 0.0 1.0 0.0 0.0 0.0 0.0
5 Chemicals/products n.e.s 38.6 0.0 8.6 0.0 15.6 0.2 0.0 0.0 1.5
6 Manufactured goods 347.3 0.0 10.0 0.1 255.4 8.2 0.0 0.6 3.2
7 Machinery/transp equipmt 185.9 0.0 70.3 0.0 114.7 0.0 0.0 0.0 0.0
8 Miscellaneous manuf arts 15.7 0.0 9.1 0.0 26.9 0.2 0.0 0.0 0.6
9 Commodities nes 4.4 0.0 0.0 0.0 0.8 0.0 0.0 0.0 0.0
Total Export 12339.7 0.0 20312.3 307.3 44369.6 526.9 0.0 1.5 1.2
Source: World Integrated Trade Solution (WITS) database, 2007
- 9 -
Size, Composition and Significance of Imports from China
Nigeria’s total imports increased from US$5.3 billion in 1996 through US$5.8billion in 2000 to
US$17.7billion in 2005 (Table 3.2). The dramatic increase of Nigeria’s total imports between 2000
and 2005 was also reflected in the country’s imports from China which rose phenomenally from as
little as US$252million in 2000 to US$2.3billion in 2005. Nigeria imports almost all of the broad
categories of products from China. In 2005, imports of machinery and transport equipment ranked
first followed by manufactured goods, miscellaneous manufactures, chemicals and food and live
animals. In trend terms, the composition of Nigeria’s imports has changed quite a bit. In 1996 for
example, chemical products imports ranked second only to machinery and transport equipment
while in 2000, manufactured products replaced chemicals in second place. Machinery and transport
equipment imports thus ranked highest in all the reference years.
This picture altered when China’s share of Nigeria’s total import is considered. While that share
rose successively from 1996 to 2005 from 3.5% to 13%, not all broad categories of goods imported
from China maintained such consistent increase. This is especially the case of mineral
fuels/lubricants, and animal/ vegetable oil/fat/wax. Furthermore, when the broad categories are
considered, Nigeria imported more of miscellaneous manufactures from China relative to the rest of
the world. This rose from 7.8% in 1996 to 30.6% in 2005. China’s share of Nigeria’s imports also
rose consecutively in food and live animals, as well as beverages and tobacco (both minimally);
crude materials excluding food and fuel, manufactured goods, machinery and transport equipment,
and miscellaneous manufactures (all four substantially). Thus, in terms of stakeholders’ analysis,
countries which hitherto exported these products to Nigeria have lost their market share in Nigeria
to China as Nigeria increasingly look towards China for the importation of these products.
Table 3.2: China’s Share of Nigeria’s Imports (US$ million)
1996 2000 2005 1996 2000 2005
SITC R. 3 Product Name World China World China World China China's share of Nigeria's imports
0 Food & live animals 885.9 3.5 1098.0 12.7 2140.6 29.8 0.4 1.2 1.4
1 Beverages and tobacco 10.8 0.0 34.2 0.3 69.4 0.7 0.0 0.9 1.0
2 Crude mater.ex food/fuel 121.9 1.8 94.0 1.8 120.4 8.9 1.5 1.9 7.4
3 Mineral fuel/lubricants 70.9 0.0 100.8 0.3 2396.7 1.0 0.0 0.3 0.04
4 Animal/veg oil/fat/wax 37.2 0.0 23.3 0.05 64.4 0.04 0.1 0.2 0.1
5 Chemicals/products n.e.s 981.3 59.6 1176.5 46.3 2085.5 174.6 6.1 3.9 8.4
6 Manufactured goods 1031.5 30.7 1095.5 53.8 3297.8 566.0 3.0 4.9 17.2
7 Machinery/transp equipmt 1876.7 66.2 1955.1 98.1 6600.0 1229.7 3.5 5.0 18.6
8 Miscellaneous manuf arts 296.1 23.2 238.4 39.4 948.7 290.1 7.8 16.5 30.6
9 Commodities nes 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total Imports 5312.1 185.1 5815.8 252.7 17723.5 2300.8 3.5 4.3 13.0
Source: World Integrated Trade Solution (WITS) database, 2007
Top 10 Export and Import Commodities
The top 10 export and import commodities are indicated on Tables 3.3 and 3.4. Mineral fuels, oils
and related products tops the list of top 10 exports followed with substantial distance by ores, slag
and ash, as well as copper and articles thereof. In effect, mineral products constitute the first three
export products of Nigeria to China. Cocoa and cocoa preparations was a distant fourth followed by
cotton (5th rank), and oil seed etc (sixth). The top six export products are primary commodities
- 10 -
made up of mineral and agricultural products. The last four commodities in the top ten list are agroallied
manufactured goods whose individual export values are less than $1 million dollars.
Table 3.3: Top 10 Export Commodities (2005)
Product Name Simple Average Tariff ($ million) Share (%) Ranking
Total Trade 9.3 526.9 100.0
Mineral fuels, oils & product of their distillati 2.5 503.9 95.64 1
Ores, slag and ash. 0.2 7.4 1.41 2
Copper and articles thereof. 3.7 1.9 0.35 3
Cocoa and cocoa preparations. 8.0 1.6 0.31 4
Cotton. 11.4 1.5 0.28 5
Oil seed, oleagi fruits; miscell grain, seed, fru 5.0 1.1 0.22 6
Lac; gums, resins & other vegetable saps & extrac 15.0 0.4 0.08 7
Prepr feathers & down; arti flower; articles huma 17.5 0.2 0.03 8
Tanning/dyeing extract; tannins & derivs; pigm et 8.3 0.2 0.03 9
Pulp of wood/of other fibrous cellulosic mat; was 0.0 0.1 0.03 10
Source: Appendix Table 3.1
In contrast to the nature of Nigeria’s top 10 export commodities, the top 10 import commodities
from China are all manufactured goods. Top on the list are electrical machinery equipment parts,
sound records followed closely by vehicles, etc, as well as nuclear reactors, boilers, machinery and
mechanical appliances. Coming at a distant fourth are articles of iron or steel followed by plastics
and articles thereof. Organic chemicals and articles of apparel and clothing accessories almost have
equal ranking. Included in the lower part of the list are ceramic products as well as inorganic
chemicals and radioactive elements.
Table 3.4: Top 10 Import Commodities (2005)
HS Chpt Product Name Simple Average tariff $ million Share (%) Ranking
Total Total Trade 12 2301 100
85 Electrical mchy equip parts thereof; sound record 11 551 24.0 1
87 Vehicles o/t railw/tramw roll-stock, pts & access 10 437 19.0 2
84 Nuclear reactors, boilers, mchy & mech appliance; 3 257 11.2 3
73 Articles of iron or steel. 19 76 3.3 4
39 Plastics and articles thereof. 13 51 2.2 5
29 Organic chemicals. 5 40 1.7 6
62 Art of apparel & clothing access, not knitted/cro 20 39 1.7 7
67 Prepr feathers & down; arti flower; articles huma 20 31 1.3 8
69 Ceramic products. 19 31 1.3 9
28 Inorgn chem; compds of prec mtl, radioact element 5 30 1.3 10
Source: Appendix Table 3.2
IV. Aid and other relations
Economic relations between Nigeria and China date back to 1971 when the two countries signed
the Joint Communiqué on the Establishment of Diplomatic Relations. Currently, China requires
Nigeria’s oil to fuel its economic expansion while Nigeria seeks Chinese expertise, finance,
technology and industrial goods as well as market for its non-oil export. Some technical and
financial assistance have been rendered by the two countries to support each other. For instance,
during the visit of China President (President Hu Jintao) visit to Nigeria in April 2006, Nigeria and
- 11 -
China signed four Agreements and three Memoranda of understanding (MOUs) on a range of
programmes to enhance their economic ties.
Available data show that some of the technical and financial assistance provided by China for
Nigeria in recent times are in the areas of health, education, communication and infrastructural
development. In the area of health, China supported Nigeria’s Rollback malaria programme with
anti-malarial drugs and treated mosquito nets worth about N400 million in 2002. In an attempt to
further support the programme in 2006, China signed an MOU with government to supply antimalaria
drugs worth N83.6 million.
In the area of education, China signed an MOU in 2006 with the Nigerian government to provide
about N670 million for the training of 50 Nigerian officials and medical personnel on
comprehensive malaria prevention and control. Further, some educational institutions in Nigeria
have established linkages with China with a view to showcasing the Chinese culture, landscape and
innovations. For instance, in collaboration with the Chinese Embassy, Abuja, the Federal
Polytechnic, Offa organised an exhibition on Chinese Culture and Landscape to advance the
cultural bond between the two countries. Similarly, China is working with the Nnamdi Azikiwe
University, Awka to provide Chinese language teaching to Nigerian students. Under this scheme,
the Chinese government is to fully sponsor the training of the university’s staff to study Mandarin
in China up to Master’s and Doctorate Degrees levels. This scheme is also characterized by
frequent exchanges of cultural troupes and students.
In 2006, a memorandum of understanding on the provision of National Information
Communication Technology Infrastructure Backbone was signed between the Federal Ministry of
Science and Technology and Huwaei Technologies. In order to support infrastructural development
in Nigeria, China through its Export Import Bank entered into a financing agreement (of N8.36
billion concessionary export grants) with Nigeria.
V. Summary and conclusion
The China-Nigeria relations as shown in the proceeding sections covered different facets of the
Nigerian economy. The recent resurgence in the relationship has been attributed to improve and
deliberate mutual efforts at the highest political levels.
Chinese FDI inflows to Nigeria have been on the increase in recent years. A ten-fold increase in the
flow of Chinese into Nigeria between 1999 and 2006 was recorded. Compare to other sources of
FDI inflows to Nigeria, Chinese FDI inflows are in the range of about 0.13% of the total inflow of
FDI in 2006. The investments from China are into manufacturing, oil and gas, telecommunication,
building and construction.
Thus, while some of the Chinese investments and activities in the country are directed at addressing
critical gap in the provision of basic infrastructure, these are not comparable to the level at which
Chinese are seeking Nigeria’s oil and gas and other raw materials.
In the area of trade relations, similar recent upsurge was captured by the available data and pieces
of information. Nigeria’s export to China is dominated by crude oil to the tune of about 95%. In
terms of relative share of market, China constitutes only about 1.5% of the value of Nigeria’s
exports in 2000 and 2005. Nigeria’s import from China is more diversified than the imports. Three
product groups: electrical machinery equipment; vehicles and nuclear reactors, boilers machinery
and mechanical appliances jointly accounted for over 50% of Nigeria’s imports from China. The
observed structure of trade pattern is inconsistent with the Nigeria’s quest to export manufactured
- 12 -
or processed products. The need to diversify export products may be an uphill task given China’s
preference for raw materials and fuel and gas. More worrisome is skewed balance of payments
position which has consistently been in favour of China. This suggests the need to examine the
structure of tariff and non-tariff barriers facing Nigeria’s exports to China. Perhaps more
importantly is an analysis of constraints facing producers and exporters in responding fully to
market openings.
Although the brief analysis presented in this report points to a similar trend in the general trade and
investment patterns with the traditional trade partners there is a strong need to critically examine in
details Nigeria-China relationship. The review presented in this paper is general and based on
incomplete information. An investigation of some of the issues raised probably by conducting a
census of Chinese interest in Nigeria is capable of shedding more light.
- 13 -
Appendix Table 3.1: Export Commodities by HS Chapters
Product Name Simple
Average
Tariff
($million) Share Ranking
Total Trade 9.3 526.9 100.0
Mineral fuels, oils & product of their distillati 2.5 503.9 95.64 1
Ores, slag and ash. 0.2 7.4 1.41 2
Copper and articles thereof. 3.7 1.9 0.35 3
Cocoa and cocoa preparations. 8.0 1.6 0.31 4
Cotton. 11.4 1.5 0.28 5
Oil seed, oleagi fruits; miscell grain, seed, fru 5.0 1.1 0.22 6
Lac; gums, resins & other vegetable saps & extrac 15.0 0.4 0.08 7
Prepr feathers & down; arti flower; articles huma 17.5 0.2 0.03 8
Tanning/dyeing extract; tannins & derivs; pigm et 8.3 0.2 0.03 9
Pulp of wood/of other fibrous cellulosic mat; was 0.0 0.1 0.03 10
Coffee, tea, matï and spices. 17.5 0.1 0.01 11
Plastics and articles thereof. 9.7 0.1 0.01 12
Aluminium and articles thereof. 3.8 0.1 0.01 13
Fish & crustacean, mollusc & other aquatic invert 12.0 0.0 0.01 14
Edible fruit and nuts; peel of citrus fruit or me 20.0 0.0 0.01 15
Miscellaneous articles of base metal. 15.3 0.0 0.00 16
Nuclear reactors, boilers, mchy & mech appliance; 9.4 0.0 0.00 17
Miscellaneous chemical products. 6.5 0.0 0.00 18
Salt; sulphur; earth & ston; plastering mat; lime 2.8 0.0 0.00 19
Vehicles o/t railw/tramw roll-stock, pts & access 20.1 0.0 0.00 20
Articles of iron or steel. 9.8 0.0 0.00 21
Tool, implement, cutlery, spoon & fork, of base m 10.3 0.0 0.00 22
Electrical mchy equip parts thereof; sound record 5.4 0.0 0.00 23
Miscellaneous manufactured articles. 25.0 0.0 0.00 24
Optical, photo, cine, meas, checking, precision, 5.0 0.0 0.00 25
Furniture; bedding, mattress, matt support, cushi 20.0 0.0 0.00 26
Prod.mill.indust; malt; starches; inulin; wheat g 35.5 0.0 0.00 27
Soap, organic surface-active agents, washing prep 10.0 0.0 0.00 28
Art of apparel & clothing access, not knitted/cro 16.0 0.0 0.00 29
Source: World Integrated Trade Solution (WITS) database, 2007
- 14 -
Appendix Table 3.2: Import Commodities by HS Chapters
Prod Product Name Simple
Average
($milli
on)
Share
(%)
Rankin
g
Total
Total Trade 12 2301 100
85 Electrical mchy equip parts thereof; sound record 11 551 24 1
87 Vehicles o/t railw/tramw roll-stock, pts & access 10 437 19 2
84 Nuclear reactors, boilers, mchy & mech appliance; 3 257 11 3
73 Articles of iron or steel. 19 76 3 4
39 Plastics and articles thereof. 13 51 2 5
29 Organic chemicals. 5 40 2 6
62 Art of apparel & clothing access, not knitted/cro 20 39 2 7
67 Prepr feathers & down; arti flower; articles huma 20 31 1 8
69 Ceramic products. 19 31 1 9
28 Inorgn chem; compds of prec mtl, radioact element 5 30 1 10
52 Cotton. 17 30 1 11
76 Aluminium and articles thereof. 20 30 1 12
94 Furniture; bedding, mattress, matt support, cushi 18 29 1 13
25 Salt; sulphur; earth & ston; plastering mat; lime 8 27 1 14
90 Optical, photo, cine, meas, checking, precision, 4 26 1 15
30 Pharmaceutical products. 9 26 1 16
83 Miscellaneous articles of base metal. 18 24 1 17
55 Man-made staple fibres. 18 23 1 18
38 Miscellaneous chemical products. 8 22 1 19
10 Cereals 50 19 1 20
42 Articles of leather; saddlery/harness; travel goo 16 18 1 21
96 Miscellaneous manufactured articles. 19 17 1 22
34 Soap, organic surface-active agents, washing prep 17 16 1 23
82 Tool, implement, cutlery, spoon & fork, of base m 13 15 1 24
61 Art of apparel & clothing access, knitted or croc 20 13 1 25
72 Iron and steel. 18 12 1 26
32 Tanning/dyeing extract; tannins & derivs; pigm et 10 10 0 27
66 Umbrellas, walking-sticks, seat-sticks, whips, et 18 7 0 28
21 Miscellaneous edible preparations. 15 7 0 29
59 Impregnated, coated, cover/laminated textile fabr 16 7 0 30
53 Other vegetable textile fibres; paper yarn & wove 20 7 0 31
63 Other made up textile articles; sets; worn clothi 20 5 0 32
91 Clocks and watches and parts thereof. 20 5 0 33
49 Printed books, newspapers, pictures & other produ 9 4 0 34
95 Toys, games & sports requisites; parts & access t 20 4 0 35
60 Knitted or crocheted fabrics. 20 4 0 36
37 Photographic or cinematographic goods. 17 4 0 37
92 Musical instruments; parts and access of such art 12 4 0 38
35 Albuminoidal subs; modified starches; glues; enzy 9 3 0 39
33 Essential oils & resinoids; perf, cosmetic/toilet 16 3 0 40
74 Copper and articles thereof. 12 2 0 41
17 Sugars and sugar confectionery. 15 2 0 42
11 Prod.mill.indust; malt; starches; inulin; wheat g 35 2 0 43
27 Mineral fuels, oils & product of their distillati 6 1 0 44
89 Ships, boats and floating structures. 6 1 0 45
- 15
China‐Nigeria Economic
Relations
AERC Scoping Studies on China‐Africa Relations
E. Olawale OGUNKOLA
waleogunkola@yahoo.com
Abiodun S. BANKOLE
and
Adeolu ADEWUYI.
Department of Economics
and
Trade Policy Research and Training Programme (TPRTP)
University of Ibadan,
Ibadan, Nigeria
[Revised Report submitted to the African Economic Research Consortium (AERC),
February, 2008]
General Economic Background
Nigeria’s quest for development which has spanned some decades is yet to deliver on the ultimate
goal of poverty reduction, despite various plans, programmes, and projects. Analysis of
performance on poverty reduction strategy necessarily examines issues in growth and equity simply
because growth may be recorded without impacting on the poor. Indeed it is not impossible for
growth to have occurred at the expense of equity. Analysis of growth drivers on one hand has
identified several factors including macroeconomic environment, political and social environment
and investment gap. Some policies are required to attract foreign direct investment and to direct
such investment into appropriate sectors.
As a resource-rich country, Nigeria’s economic performance has been unfortunately driven by the
oil and gas sector to the extent that even progress recorded towards genuine economic development
prior to the discovery of oil in commercial quantity has been virtually eroded. In recent time (2000-
2005), the GDP growth was about 5.7% and the growth in the non-oil sector which contributed
about 5.9% of the GDP. However, the sector dominates the supply of foreign exchange and given
that the political economy of the country vested this important resource in the hand of the
government it also contributes a large chunk of government revenue.
The decline in the agricultural sector performance has been dramatic since the discovery of oil. The
manufacturing sector has not performed even better. A few statistics illustrate the poor performance
of the non-oil sector. The share of non-oil sector decreased from about 94% in 1970 to about 52%
in 2004. The decrease affected all the sectors (agriculture, industry, and services) but in different
magnitude. Agriculture GDP declined from about 41% to about 17% over the same period. The
decline in the services sector was from about 45% to about 27% during the period under review.
Nigeria’s non-oil sector is inefficiently servicing the domestic market as non-oil export is negligible
(about 1% of the GDP in 2005).
Table 1.1:
Structure of the Nigerian Economy, 1974-2004 (percent of GDP at current factor costs)
1970 1980 1990 2000 2003 2004
Oil sector GDP 6.0 29.1 39.3 48.2 44.6 48.2
Non-oil sector GDP 94.0 70.9 60.7 51.8 55.4 51.8
Agriculture 41.3 20.6 29.7 26.3 26.4 16.6
Industry 7.8 16.4 7.4 4.5 4.8 8.7
Services 45.0 33.8 23.6 21.0 24.2 26.5
Source: World Bank (2007)
It has also been recognized that sustainable development of the Nigerian economy rests the
diversification of the economy away from oil and gas to non-oil sector and this should be based on
the country’s abundant resources and comparative advantage. An analysis of constraints to the high
performance of the non-oil sectors identifies low productivity as a precursor to low private returns
and which in turn lead to low investment. Weak and unreliable infrastructure, macroeconomic
instability, microeconomic risks from corruption and weakness of institutions and regulations to
guide investment behaviour are the main constraints to high performance of the economy (World
Bank, 2007)1.
1 World Bank (2007), Nigeria: Competitiveness and Growth (Country Economic Memorandum)
- 2 -
Nigeria’s domestic market is vast but very small for modern day technology. Thus, there is the need
for seeking favourable external market at regional as well as at global level. Negotiations of the
trade agreements are expected to take these constraints into consideration. Indeed, for Nigeria
within-the border issues are relatively more important than seeking for more favourable market
access conditions. It is in this vein that aid-for-trade concept is more relevant to the country. A
critical element in enhancing the performance of non-oil sector as well as ensuring effective supply
response to market opening is investment in infrastructure which also in turn enhances private
investment. Thus, private investment and investment in the public sector of the economy is one of
the factors for ensuring sustainable development.
Hitherto, traditional development partners mainly from Europe and the Americas (U.S. A. and
Canada) have dominated trade, investment (in terms of foreign direct investment (FDI)) and grants
and financial as well as technical aid to the country. These are governed by various bilateral and
regional agreements that exist between these countries and Nigeria. Although Nigeria and these
countries have come a long way in their relationship, it is debateable if such has in any significant
way assist the country in its quest for development. The relationship appears to be exploitative at
least from the trend in the structure and pattern of trade and FDI inflow to the country. This is
based on the fact that oil and gas sector dominates the country’s exports to the tune of about 98%
and FDI inflows to the oil and gas sector accounted for about 40%.
Although Sino-Nigeria relationship dates back to more than three decades, recent developments call
for a careful and detailed analysis of this relationship and to this end, we seek to provide analysis of
the relationship with respect to investment, trade and aid: To what extent is China different from
other exploitative practices? What lessons can we learn from the past in order to make the
blossoming relationship produce win-win outcome?
In order to put the study in its proper perspective, Section II examines the cooperation
arrangements between Nigeria and China with specific focus on the diplomatic tie, technical
assistance, scientific cooperation, economic cooperation and cultural cooperation. Section III
presents an overview of investment relations with a view to determining its size, composition and
significance. Section IV is on trade relations. Export and import structures as well as the bilateral
balance of trade are examined. Section is an attempt at presenting information on aid flow from
China to Nigeria and Section VI concludes the report by revisiting the questions raised above.
II Cooperation arrangements
Recent developments in China and Nigeria relationship are not unconnected with the renewed ties
between the two giants. Although, China and Nigeria established diplomatic tie in 1972, the last
decade has witnessed unprecedented renewed positive and mutually beneficial developments.
Indeed between 1999 and 2006 diplomatic visits at the highest level were recorded: two visits in
each direction2 and various visits at other levels. All these visits, no doubt, are precursors to
2 Chinese leaders who visited Nigeria are as follows: Vice Premier Geng Biao (October 1978), Vice Premier Huang
Hua (November 1981), Vice Premier Tian Jiyun (November 1984), Vice Premier Wu Xueqian (March 1990), Vice
Premier and Foreign Minister Qian Qichen (January 1995), State Councilor and Secretary General of the State Council
Luo Gan (September 1996), Premier Li Peng (May 1997), Special Envoy of President Jiang Zeming, State Councilor
Ismail Amat (May 1999), Foreign Minister Tang Jiaxuan (January 2000), President Jiang Zemin (April 2002), and Vice
Chairman of the Standing Committee of the National Peoples Congress Han Qide (December 2003). China’s foreign
Minister, Li Zhaoxing (January, 2006), President Hu Jintao (April 2006)
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developments in other facets of the relationship. Bilateral agreements are entered into in the process
some of which are listed in Table 1.2
Table1.2: Selected Agreements between Nigeria and China, 2001 to 2006
Type of Agreements Year
Agreement on Trade, Investment Promotion and Protection 2001
Agreement for the avoidance of double Taxation and Prevention of Fiscal Evasion with respect to Tax and
Income
2002
Agreement on Consular Affairs 2002
Agreement on Cooperation on Strengthening Management of narcotic Drugs, Psychotropic Substances and
diversion of Precursor Chemical
2002
Agreement on Tourist Cooperation 2002
Strategic Partnership Agreement 2005
A memorandum of Understanding on Investment Cooperation between the Federal Ministry of Commerce
of Nigeria and Ministry of Commerce of India
2006
Economic Cooperation Agreement between Nigeria and Xinguang International Group of China 2006
Source: Authors’ compilation
On diplomatic relations, various exchanges of visits and signed agreements and many Memoranda
of Understanding (MOUs) are indicative of the cordial relationship. Besides agreement on consular
affairs and strategic partnership agreement featuring mutual political trust, mutual economic benefit
and mutual support in international affairs have been signed. Various technical assistance in the
military, education and health, and technology have been received from Nigeria. For example an
aid of 46 million Yuan to Nigeria for the purpose of purchases of anti-malaria medicines and for
training of Nigerian health personnel on malaria control and prevention was granted by China.
Scientific cooperation between the two countries is also experiencing a boom. The relationship in
this area has witnessed the launching of NIGERCOMSTAT 1, Nigeria’s first communication
satellite in early 2007. An MOU on the Provision of National Information Communication
Technology Infrastructure Backbone between the Federal Ministry of Science and Technology and
Huawei Technologies was signed. Increase in economic cooperation is noticed both in trade and
investment both at public and private levels. Renewed cultural cooperation also manifests in
various areas. For example, some institutions of higher learning in Nigeria3 are collaborating with
their Chinese counterparts in the area of Chinese culture, innovation, while cultural troupes and
students are being exchanged.
The cooperation arrangements between China and Nigeria on different fronts a briefly examined in
the preceding paragraphs. Apart from providing alternatives to the traditional focus of government
such arrangements opened a new vista for other stakeholders.
The recent waves of diplomatic relations appear to a reasonable extent mutually beneficial. The
Nigerian was indeed on an aggressive campaign for FDI and Chinese government was also seeking
for markets for inputs especially raw materials as well as markets for finished products. While the
diplomatic relationship provides and generates general guidelines in terms of agreements, protocols
and Memorandum of Understanding; the cost-benefit analysis of the cooperation arrangements
Leaders of Nigeria who visited China are as follows: Head of State, Gen. Yakubu Gowon (September 1974), Vice-
President Dr. Alex I. Ekwueme (March 1983), Chief of the Army Staff Gen. Ibrahim Babangida (September 1984),
Chief of the Army Staff Gen. Sani Abacha (October 1989), Chief of the Defense Staff, General Abdulsalami Abubakar
(July 1997), President Olusegun Obasanjo (April 1999, August 2001 and 2005), President of Senate Anyim (December
2001), Vice President Abubakar (July 2002), and Deputy Speaker Nwuche of the National Assembly (July 2002).
3 Federal Polytechnic, Offa and Nnamdi Azikwe University are currently involved.
- 4 -
depend on several factors including the level of implementation, domestic rules, regulations and
institutional arrangements.
Nigeria stands to gain from technical assistance and scientific cooperation given China’s
advancement in these areas. A well known fact is that Nigerian military have benefited from
China’s technical assistance form of military training and even supply of military hardware. Health
personnel and different categories of patients patronizing public health providers are the main
beneficiaries of technical assistance offered by China mainly in the roll-back malaria programme.
Nigerian academia have also benefited from the cooperation arrangement between Nigeria and
China especially in the area of exchange programmes and promotion of the different culture.
III. Investment Relations
Positive developments have been recently recorded in the net FDI as it has doubled from US$3
billion in 2003 to more than US$6 billion in 2005. The share of the oil and gas sector was about 75
percent. The developments in the non-oil FDI is also significant as this component increased from
about $0.3 billion in 2003 to about $1.7 billion in 2005. Three related types of efforts explain the
observed positive developments: change in FDI regime; second, privatization programme of the
government; and third, the aggressive drive of government in attracting FDI into the country. The
recent developments notwithstanding, there is a huge investment gap in the development of the
Nigerian economy and the required investment can only be expected after the investment climate
has improved.
Our approach in this section is to review Chinese investment in Nigeria with a view to describing
its size, composition and significance. Data permitting the analysis would cover the relative size of
Chinese FDI compared to other sources of FDI, and the composition of the Chinese FDI with a
view to revealing relative sectoral preferences. This is necessary in order to characterize the nature
of investment and consequently assist in drawing inferences on the possible benefits of such
activities to the host country: Nigeria.
Trend in Chinese FDI inflow to Nigeria
Available information points to a general upward trend in the inflow of FDI from China to Nigeria.
Table 2.1 presents a global picture of FDI inflow to Nigeria from different regions and China from
1999 to 2006. All the regions showed significant increase in FDI inflow from the 1999 level. Thus,
the upward increase in the aggregate FDI flows to Nigeria from about $190.61 million in 1999 to
about $4169.14 million in 2006 is a joint increase in the levels of FDI by all the regions.
Table 2.1: Foreign Direct Investment in Nigeria, 1999-2006, $ Million
Region/Country 1999 2000 2001 2002 2003 2004 2005 2006
North America 7.35 9.84 12.10 36.16 40.34 4354.14 5166.32 1601.28
South America 1.15 2.96 0.39 0.05 7.14 60.04 24.56 11.76
Asia/Pacific 2.94 5.93 4.45 5.17 1.54 32.12 47.29 39.63
China 0.02 1.08 2.39 0.0 0.05 0.51 1.88 5.50
Middle/Far East 7.41 2.75 10.92 5.30 6.74 23.27 21.22 13.39
Europe 164.95 136.46 98.86 200.24 293.66 2624.30 3084.68 2441.52
Africa 6.79 9.45 8.24 24.30 91.41 173.62 169.04 56.06
190.61 168.47 137.35 271.22 440.88 7268.00 8514.99 4169.14
Source: Based on data from Nigerian Investment Promotion Commission (NIPC)
- 5 -
Relative to other regions, South American region contributed the least to the level of FDI inflow to
Nigeria. This was followed by the Asia-Pacific region. By 2006, though the relative positions
remained unchanged as the South America maintained its position, FDI inflows from Asia Pacific
region have surpassed the inflows from the Middle and Far East region. Thus, between 1999 and
2006, FDI inflows from Asia- Pacific region to Nigeria increased at a higher rate than their similar
inflows from the Middle and Far East region. This suggests increasing importance of China in the
observed trend. A further analysis of inflow of FDI from this region revealed that although China
ranked 5th in the magnitude of FDI in flows from the region to Nigeria behind India, Singapore,
Hong Kong, and Japan in that order, the country seems set to overtake these leading countries. This
is not farfetched given that Chinese FDI inflows to Nigeria increased from an average of $0.55
million in 1999-2000 to about $5.5 million in 2006. This is a tenfold increase compared to 9-fold
increase by the region as a whole.
Composition of Chinese FDI in Nigeria
Although, information about Chinese activities in the country points to increasing economic (trade,
commerce and investment), social (health and education) and technical relation, the composition of
Chinese FDI into Nigeria is fragmented. According to a source: China has set up over 30 solely
owned companies or joint venture in Nigeria actively involved in the construction, oil and gas,
technology, services and education sectors of the Nigerian economy. Indeed the increased Chinese
economic interests in Nigeria can be broadly classified into two: private and public. According to
information obtained from the Nigerian Investment Promotion Commission (NIPC), Chinese
private FDI is composed of agro-allied industry, manufacturing and communications sectors. On
one hand, some of these investments are joint venture mainly between Chinese and Nigerian
investors4. On the other hand, some are wholly foreign owned either wholly by the Chinese5 or in
partnership with other foreign investors.6 Some of the Chinese investments have also benefited
from investment incentives in the country such as pioneer status and expatriate quotas have been
granted to some of these companies (see Table 2.2).
Thus in 2005, the official record by Nigeria was $1.88 million FDI inflow from China. This seems
to be at variance with the impression created in the media. Various explanations can be adduced for
the seemingly paucity of observed figure: First, the upsurge in Chinese FDI inflow to Nigeria
occurred only in the recent time i.e. between 2006 and 2008, a period that is not covered by the
available data. Second, there is also the possibility that the promises and declarations captured by
the media did not eventually materialised. A case in point is the sales of Kaduna Refinery that was
announced in January 2006. It was meant to be a $2.3 billion worth of investment by the Chinese
state controlled energy company, CNOOC. By March 2007, the government was considering a
review of the deal.
The “public” investment and economic activities of Chinese in Nigeria have also gained
prominence in recent time. This is not unexpected given the high profile witnessed at the political
level (see the introduction to this study). This type of investment spanned different areas of the
Nigerian economy and prominent among them are those in oil and gas, construction especially
building of infrastructure. Table 2.3 lists some of the Chinese investments and projects in Nigeria.
There is the need to distinguish between investment, loan and contracts. This, however, requires
further insight to data. Currently available data do not offer sufficient information. For example, a
4 See table 2.2, Firm number 1
5 See table 2.2, Firms number 2 to 4
6 See table 2.2, Firm number 5
- 6 -
further probing of the deal to refurbish the Nigerian railways by the Chinese reveals that it has a
soft loan component.
FDI has a host of advantages including augmentation of domestic capital; transfer of technology,
knowledge and skills; promotion of competition and innovation; and enhancing export
performance. These must be weighed against other issues such as anti-competitive and restrictive
business practices; tax avoidance and abusive transfer pricing; volatile flows of investment and
related payments deleterious for balance of payments; transfer of polluting activities and
technologies; and excessive influence on economic affairs with possible negative effects on
industrial development and national security.
Table 2.2: Some Characteristics of Chinese Companies listed in 2005
Company
Name
Origin Nature of Business Nature of
Investment7
Level of
Investment
Employment
Generation
Happy Chef
Restaurant Ltd
Chinese &
Nigerians
Foods and Restaurant Business JV N20million 35
Plas Alliance
Company Ltd.
Chinese Manufacturing of Rubber Bags & Shoes WFO N75million 170
Royal Motors
Company Ltd
Chinese Assembling of Motorcycles WFO N10 million 1000
Sun Lung
Industries (Nigeria)
Ltd
Chinese Manufacture, import, and distribution of
all types of telecommunication, electronic
goods, telecomm materials, instrument,
musical instruments,
WFO N20 Million 75
ZTE Nigeria
Investment Ltd
1 Chinese
1Australian
Production, Sales, Services, Investment
related to Telecommunications
WFO N5 Million 136
Source: NIPC
A country desirous of hosting FDI must of necessity institute policies aimed at maximizing the
direct and indirect benefits as well as in minimizing the possible negative impacts. A litmus test for
gauging the motive of FDI is to classify such investments into resource-seeking, market-seeking or
efficiency-seeking. Efficiency-seeking FDI is preferred to other forms at least from the perspective
of the host country. However, for a country to attract efficiency-seeking type of FDI
macroeconomic stability must be ensured and distinct, predictable and easy-to-access policy
environment including incentives must be instituted.
Giving the list of private FDI and the sectoral concentration, efficiency motive may not be the
driving force of inflow of Chinese FDI in the Nigerian economy. From the list of public FDI,
resource-seeking motive cannot be ruled out. However, there are other categories of FDI that
cannot neatly fit into resource-seeking class. These include those in the area of building
infrastructure.
A veritable channel for optimal benefit is in the involvement of indigenous entrepreneurs in the
affairs of the particular firm. A joint venture has higher potential of positive impact in the host
economy. Beyond, the involvement of indigenous entrepreneurs at the management level, local
expertise and other work force are the channels through which technology is transferred and
technological capacity is developed.
Chinese firms in Nigeria have been criticized for being “closed” as they hardly employ local
experts. There are even submission that they mal-treat their workers. According to a report, the
7 JV = Joint Venture, WFO = Wholly Foreign Owned
- 7 -
conditions of employment of Nigerians in Chinese firms neither conform with the Nigeria Labour
Laws nor to that of the International Labour Organisation (ILO). The Report also alleged that
technology transfer from Chinese FDI is insignificant because most of the Chinese firms bring into
the country finished products and complete equipment with Chinese technicians. In a nutshell the
expected benefits may not be realized. The lesson is for the country not only to design appropriate
policies and regulations but also to ensure that these are implemented.
Although some of the Chinese investments are in critical areas of the Nigerian economy especially
in infrastructure (telecommunications, water, electricity, housing, etc.) hence they have high social
contents. However, there are reservations about the activities of Chinese investors especially those
who are engaged in manufacturing. Such complaints include sharp practices such as importation
and production of sub standard products, and lack of respect for their workers.
However, the quest for oil and gas by the Chinese seems to be of importance in the resurgence of
the current wave of relations. Consequently, Chinese nationals are not immune from the spate of
social unrest in the Niger Delta (the area where oil and gas are located in Nigeria). Some of the
Chinese oil workers were recently abducted by militants who are agitating for a more equitable
distribution of resources in the country.
Table 2.3: Some of the Chinese Investment and Projects in Nigeria
Description Value
China National Overseas Oil Company Limited8 (CNOOC) 45% stake in OPL 246 in Offshore
deepwater oil field
$2.7 billion
Controlling shares in Kaduna Refinery
Modernisation of Nigeria’s one-track rail to standard gauge rail (Note: China has loaned Nigeria
$2.5 billion to finance the refurbishment of the railway system
$8.3 billion (1st
phase)
Financial support to Reliance Telecommunications Ltd. (RelTel) by China’s Development Bank
facilitated by Huawei Technologies
$20 million
Huawei equipment agreement with GV Telecoms/Prestel $250 million
III. Trade Relations
Size, Composition and Significance of Exports to China
Nigeria’s exports to China are spread over many and varied products which have been classified
according to the Standard International Trade Classification Revision 3 (SITC Rev. 3) shown on
Table 3.1. These products include food, animals, crude materials, oils, chemical products, and
manufactured products. Though the source of data did not show data on Nigeria’s exports to China
in 1995, data were recorded for 2000 and 2005. In 2000, four broad commodities were exported
totaling US$307.3 million, with the main export commodity being Mineral fuel and lubricants
which represented US$273.7 million. The next important export in 2000 was crude materials
excluding food and fuel which totaled US$33.3 million. The remaining two broad commodities
exported to China were quite insignificant with values between US$0.1 million and US$0.2
million. Thus, in terms of Nigeria’s exports to China, Mineral fuel and lubricants ranked first,
followed by crude materials excluding food and fuel. Beverages and live animals exports rank third
8 CNOOC is one of the four big oil companies created when China’s oil industry was restructured seven years ago.
Cited in BusinessDay Africa, January 16 2006.
- 8 -
while manufactured goods rank fourth. In terms of significance of Nigeria’s exports to China
relative to the world, Nigeria exported more crude materials excluding food and fuel to China as
this constituted 61.1%. Mineral Fuel and lubricants which constituted the main exports of Nigeria
to China in 2000 was a paltry 1.4% of Nigeria’s total world exports. In effect, out of US$20.3
billion total Nigeria’s exports, only 1.5% was exported to China.
Nigeria’s exports position was more impressive in 2005. The country’s exports more than doubled
the value in 2000; this accounted for by all the products, from US$20.3 billion in 2000 to
US$44.4billion in 2005. In contrast, though exports to China increased to US$526.9 million in
2005, the increase was not as much as that of Nigeria’s total exports. The composition of exports to
China in 2005 was not very different from that of 2000 but experienced some repositioning of
certain broad products. Thus, mineral fuel and lubricants still ranked first followed in ranking by
crude materials excluding food and fuel. However, manufactured goods, which ranked last in 2000,
displaced food and live animals while two broad products; chemicals, and miscellaneous
manufactures, featured in 2005. Also, exports of crude materials excluding food and fuel reduced
between 2000 and 2005. The proportion of Nigeria’s exports destined for China reduced in 2005
even when the absolute value showed an increase. Nigeria’s export to China in 2005 was 1.2% of
its total exports which represented a reduction compared to 2000. The export destinations appeared
to have been more fairly diversified in 2005, as areas where exports to China was dominant, such as
crude materials excluding food and fuel, became insignificant while China gained positions in such
other areas as food and live animals, chemicals, manufactured goods and miscellaneous
manufactures. In other words, even though Nigeria’s exports to China relative to the rest of the
world dwindled in 2005, Nigeria exported more varieties of products to China compared to earlier
periods.
In effect, producers and exporters of those broad categories of products whose exports increased
between 2000 and 2005 are better off as they earned additional incomes. These include producers
and exporters of food and live animals, mineral fuel/lubricants, chemicals, manufactured goods,
and miscellaneous manufactures. Nigerian producers and exporters of crude materials excluding
food and fuel lost export market share in China and thus were worse off in 2005.
Table 3.1: China’s Share of Nigeria’s Exports (US$ million)
1995 2000 2005 1995 2000 2005
Rev. 3 World China World China World China
China’s Share of
Nigeria’s Imports
0 Food & live animals 293.9 0.0 205.4 0.2 592.6 1.8 0.0 0.1 0.3
1 Beverages and tobacco 1.7 0.0 1.3 0.0 3.9 0.0 0.0 0.0 0.0
2 Crude mater.ex food/fuel 262.4 0.0 54.5 33.3 304.0 12.6 0.0 61.1 4.1
3 Mineral fuel/lubricants 11189.8 0.0 19950.5 273.7 43054.7 503.9 0.0 1.4 1.2
4 Animal/veg oil/fat/wax 0.1 0.0 2.6 0.0 1.0 0.0 0.0 0.0 0.0
5 Chemicals/products n.e.s 38.6 0.0 8.6 0.0 15.6 0.2 0.0 0.0 1.5
6 Manufactured goods 347.3 0.0 10.0 0.1 255.4 8.2 0.0 0.6 3.2
7 Machinery/transp equipmt 185.9 0.0 70.3 0.0 114.7 0.0 0.0 0.0 0.0
8 Miscellaneous manuf arts 15.7 0.0 9.1 0.0 26.9 0.2 0.0 0.0 0.6
9 Commodities nes 4.4 0.0 0.0 0.0 0.8 0.0 0.0 0.0 0.0
Total Export 12339.7 0.0 20312.3 307.3 44369.6 526.9 0.0 1.5 1.2
Source: World Integrated Trade Solution (WITS) database, 2007
- 9 -
Size, Composition and Significance of Imports from China
Nigeria’s total imports increased from US$5.3 billion in 1996 through US$5.8billion in 2000 to
US$17.7billion in 2005 (Table 3.2). The dramatic increase of Nigeria’s total imports between 2000
and 2005 was also reflected in the country’s imports from China which rose phenomenally from as
little as US$252million in 2000 to US$2.3billion in 2005. Nigeria imports almost all of the broad
categories of products from China. In 2005, imports of machinery and transport equipment ranked
first followed by manufactured goods, miscellaneous manufactures, chemicals and food and live
animals. In trend terms, the composition of Nigeria’s imports has changed quite a bit. In 1996 for
example, chemical products imports ranked second only to machinery and transport equipment
while in 2000, manufactured products replaced chemicals in second place. Machinery and transport
equipment imports thus ranked highest in all the reference years.
This picture altered when China’s share of Nigeria’s total import is considered. While that share
rose successively from 1996 to 2005 from 3.5% to 13%, not all broad categories of goods imported
from China maintained such consistent increase. This is especially the case of mineral
fuels/lubricants, and animal/ vegetable oil/fat/wax. Furthermore, when the broad categories are
considered, Nigeria imported more of miscellaneous manufactures from China relative to the rest of
the world. This rose from 7.8% in 1996 to 30.6% in 2005. China’s share of Nigeria’s imports also
rose consecutively in food and live animals, as well as beverages and tobacco (both minimally);
crude materials excluding food and fuel, manufactured goods, machinery and transport equipment,
and miscellaneous manufactures (all four substantially). Thus, in terms of stakeholders’ analysis,
countries which hitherto exported these products to Nigeria have lost their market share in Nigeria
to China as Nigeria increasingly look towards China for the importation of these products.
Table 3.2: China’s Share of Nigeria’s Imports (US$ million)
1996 2000 2005 1996 2000 2005
SITC R. 3 Product Name World China World China World China China's share of Nigeria's imports
0 Food & live animals 885.9 3.5 1098.0 12.7 2140.6 29.8 0.4 1.2 1.4
1 Beverages and tobacco 10.8 0.0 34.2 0.3 69.4 0.7 0.0 0.9 1.0
2 Crude mater.ex food/fuel 121.9 1.8 94.0 1.8 120.4 8.9 1.5 1.9 7.4
3 Mineral fuel/lubricants 70.9 0.0 100.8 0.3 2396.7 1.0 0.0 0.3 0.04
4 Animal/veg oil/fat/wax 37.2 0.0 23.3 0.05 64.4 0.04 0.1 0.2 0.1
5 Chemicals/products n.e.s 981.3 59.6 1176.5 46.3 2085.5 174.6 6.1 3.9 8.4
6 Manufactured goods 1031.5 30.7 1095.5 53.8 3297.8 566.0 3.0 4.9 17.2
7 Machinery/transp equipmt 1876.7 66.2 1955.1 98.1 6600.0 1229.7 3.5 5.0 18.6
8 Miscellaneous manuf arts 296.1 23.2 238.4 39.4 948.7 290.1 7.8 16.5 30.6
9 Commodities nes 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total Imports 5312.1 185.1 5815.8 252.7 17723.5 2300.8 3.5 4.3 13.0
Source: World Integrated Trade Solution (WITS) database, 2007
Top 10 Export and Import Commodities
The top 10 export and import commodities are indicated on Tables 3.3 and 3.4. Mineral fuels, oils
and related products tops the list of top 10 exports followed with substantial distance by ores, slag
and ash, as well as copper and articles thereof. In effect, mineral products constitute the first three
export products of Nigeria to China. Cocoa and cocoa preparations was a distant fourth followed by
cotton (5th rank), and oil seed etc (sixth). The top six export products are primary commodities
- 10 -
made up of mineral and agricultural products. The last four commodities in the top ten list are agroallied
manufactured goods whose individual export values are less than $1 million dollars.
Table 3.3: Top 10 Export Commodities (2005)
Product Name Simple Average Tariff ($ million) Share (%) Ranking
Total Trade 9.3 526.9 100.0
Mineral fuels, oils & product of their distillati 2.5 503.9 95.64 1
Ores, slag and ash. 0.2 7.4 1.41 2
Copper and articles thereof. 3.7 1.9 0.35 3
Cocoa and cocoa preparations. 8.0 1.6 0.31 4
Cotton. 11.4 1.5 0.28 5
Oil seed, oleagi fruits; miscell grain, seed, fru 5.0 1.1 0.22 6
Lac; gums, resins & other vegetable saps & extrac 15.0 0.4 0.08 7
Prepr feathers & down; arti flower; articles huma 17.5 0.2 0.03 8
Tanning/dyeing extract; tannins & derivs; pigm et 8.3 0.2 0.03 9
Pulp of wood/of other fibrous cellulosic mat; was 0.0 0.1 0.03 10
Source: Appendix Table 3.1
In contrast to the nature of Nigeria’s top 10 export commodities, the top 10 import commodities
from China are all manufactured goods. Top on the list are electrical machinery equipment parts,
sound records followed closely by vehicles, etc, as well as nuclear reactors, boilers, machinery and
mechanical appliances. Coming at a distant fourth are articles of iron or steel followed by plastics
and articles thereof. Organic chemicals and articles of apparel and clothing accessories almost have
equal ranking. Included in the lower part of the list are ceramic products as well as inorganic
chemicals and radioactive elements.
Table 3.4: Top 10 Import Commodities (2005)
HS Chpt Product Name Simple Average tariff $ million Share (%) Ranking
Total Total Trade 12 2301 100
85 Electrical mchy equip parts thereof; sound record 11 551 24.0 1
87 Vehicles o/t railw/tramw roll-stock, pts & access 10 437 19.0 2
84 Nuclear reactors, boilers, mchy & mech appliance; 3 257 11.2 3
73 Articles of iron or steel. 19 76 3.3 4
39 Plastics and articles thereof. 13 51 2.2 5
29 Organic chemicals. 5 40 1.7 6
62 Art of apparel & clothing access, not knitted/cro 20 39 1.7 7
67 Prepr feathers & down; arti flower; articles huma 20 31 1.3 8
69 Ceramic products. 19 31 1.3 9
28 Inorgn chem; compds of prec mtl, radioact element 5 30 1.3 10
Source: Appendix Table 3.2
IV. Aid and other relations
Economic relations between Nigeria and China date back to 1971 when the two countries signed
the Joint Communiqué on the Establishment of Diplomatic Relations. Currently, China requires
Nigeria’s oil to fuel its economic expansion while Nigeria seeks Chinese expertise, finance,
technology and industrial goods as well as market for its non-oil export. Some technical and
financial assistance have been rendered by the two countries to support each other. For instance,
during the visit of China President (President Hu Jintao) visit to Nigeria in April 2006, Nigeria and
- 11 -
China signed four Agreements and three Memoranda of understanding (MOUs) on a range of
programmes to enhance their economic ties.
Available data show that some of the technical and financial assistance provided by China for
Nigeria in recent times are in the areas of health, education, communication and infrastructural
development. In the area of health, China supported Nigeria’s Rollback malaria programme with
anti-malarial drugs and treated mosquito nets worth about N400 million in 2002. In an attempt to
further support the programme in 2006, China signed an MOU with government to supply antimalaria
drugs worth N83.6 million.
In the area of education, China signed an MOU in 2006 with the Nigerian government to provide
about N670 million for the training of 50 Nigerian officials and medical personnel on
comprehensive malaria prevention and control. Further, some educational institutions in Nigeria
have established linkages with China with a view to showcasing the Chinese culture, landscape and
innovations. For instance, in collaboration with the Chinese Embassy, Abuja, the Federal
Polytechnic, Offa organised an exhibition on Chinese Culture and Landscape to advance the
cultural bond between the two countries. Similarly, China is working with the Nnamdi Azikiwe
University, Awka to provide Chinese language teaching to Nigerian students. Under this scheme,
the Chinese government is to fully sponsor the training of the university’s staff to study Mandarin
in China up to Master’s and Doctorate Degrees levels. This scheme is also characterized by
frequent exchanges of cultural troupes and students.
In 2006, a memorandum of understanding on the provision of National Information
Communication Technology Infrastructure Backbone was signed between the Federal Ministry of
Science and Technology and Huwaei Technologies. In order to support infrastructural development
in Nigeria, China through its Export Import Bank entered into a financing agreement (of N8.36
billion concessionary export grants) with Nigeria.
V. Summary and conclusion
The China-Nigeria relations as shown in the proceeding sections covered different facets of the
Nigerian economy. The recent resurgence in the relationship has been attributed to improve and
deliberate mutual efforts at the highest political levels.
Chinese FDI inflows to Nigeria have been on the increase in recent years. A ten-fold increase in the
flow of Chinese into Nigeria between 1999 and 2006 was recorded. Compare to other sources of
FDI inflows to Nigeria, Chinese FDI inflows are in the range of about 0.13% of the total inflow of
FDI in 2006. The investments from China are into manufacturing, oil and gas, telecommunication,
building and construction.
Thus, while some of the Chinese investments and activities in the country are directed at addressing
critical gap in the provision of basic infrastructure, these are not comparable to the level at which
Chinese are seeking Nigeria’s oil and gas and other raw materials.
In the area of trade relations, similar recent upsurge was captured by the available data and pieces
of information. Nigeria’s export to China is dominated by crude oil to the tune of about 95%. In
terms of relative share of market, China constitutes only about 1.5% of the value of Nigeria’s
exports in 2000 and 2005. Nigeria’s import from China is more diversified than the imports. Three
product groups: electrical machinery equipment; vehicles and nuclear reactors, boilers machinery
and mechanical appliances jointly accounted for over 50% of Nigeria’s imports from China. The
observed structure of trade pattern is inconsistent with the Nigeria’s quest to export manufactured
- 12 -
or processed products. The need to diversify export products may be an uphill task given China’s
preference for raw materials and fuel and gas. More worrisome is skewed balance of payments
position which has consistently been in favour of China. This suggests the need to examine the
structure of tariff and non-tariff barriers facing Nigeria’s exports to China. Perhaps more
importantly is an analysis of constraints facing producers and exporters in responding fully to
market openings.
Although the brief analysis presented in this report points to a similar trend in the general trade and
investment patterns with the traditional trade partners there is a strong need to critically examine in
details Nigeria-China relationship. The review presented in this paper is general and based on
incomplete information. An investigation of some of the issues raised probably by conducting a
census of Chinese interest in Nigeria is capable of shedding more light.
- 13 -
Appendix Table 3.1: Export Commodities by HS Chapters
Product Name Simple
Average
Tariff
($million) Share Ranking
Total Trade 9.3 526.9 100.0
Mineral fuels, oils & product of their distillati 2.5 503.9 95.64 1
Ores, slag and ash. 0.2 7.4 1.41 2
Copper and articles thereof. 3.7 1.9 0.35 3
Cocoa and cocoa preparations. 8.0 1.6 0.31 4
Cotton. 11.4 1.5 0.28 5
Oil seed, oleagi fruits; miscell grain, seed, fru 5.0 1.1 0.22 6
Lac; gums, resins & other vegetable saps & extrac 15.0 0.4 0.08 7
Prepr feathers & down; arti flower; articles huma 17.5 0.2 0.03 8
Tanning/dyeing extract; tannins & derivs; pigm et 8.3 0.2 0.03 9
Pulp of wood/of other fibrous cellulosic mat; was 0.0 0.1 0.03 10
Coffee, tea, matï and spices. 17.5 0.1 0.01 11
Plastics and articles thereof. 9.7 0.1 0.01 12
Aluminium and articles thereof. 3.8 0.1 0.01 13
Fish & crustacean, mollusc & other aquatic invert 12.0 0.0 0.01 14
Edible fruit and nuts; peel of citrus fruit or me 20.0 0.0 0.01 15
Miscellaneous articles of base metal. 15.3 0.0 0.00 16
Nuclear reactors, boilers, mchy & mech appliance; 9.4 0.0 0.00 17
Miscellaneous chemical products. 6.5 0.0 0.00 18
Salt; sulphur; earth & ston; plastering mat; lime 2.8 0.0 0.00 19
Vehicles o/t railw/tramw roll-stock, pts & access 20.1 0.0 0.00 20
Articles of iron or steel. 9.8 0.0 0.00 21
Tool, implement, cutlery, spoon & fork, of base m 10.3 0.0 0.00 22
Electrical mchy equip parts thereof; sound record 5.4 0.0 0.00 23
Miscellaneous manufactured articles. 25.0 0.0 0.00 24
Optical, photo, cine, meas, checking, precision, 5.0 0.0 0.00 25
Furniture; bedding, mattress, matt support, cushi 20.0 0.0 0.00 26
Prod.mill.indust; malt; starches; inulin; wheat g 35.5 0.0 0.00 27
Soap, organic surface-active agents, washing prep 10.0 0.0 0.00 28
Art of apparel & clothing access, not knitted/cro 16.0 0.0 0.00 29
Source: World Integrated Trade Solution (WITS) database, 2007
- 14 -
Appendix Table 3.2: Import Commodities by HS Chapters
Prod Product Name Simple
Average
($milli
on)
Share
(%)
Rankin
g
Total
Total Trade 12 2301 100
85 Electrical mchy equip parts thereof; sound record 11 551 24 1
87 Vehicles o/t railw/tramw roll-stock, pts & access 10 437 19 2
84 Nuclear reactors, boilers, mchy & mech appliance; 3 257 11 3
73 Articles of iron or steel. 19 76 3 4
39 Plastics and articles thereof. 13 51 2 5
29 Organic chemicals. 5 40 2 6
62 Art of apparel & clothing access, not knitted/cro 20 39 2 7
67 Prepr feathers & down; arti flower; articles huma 20 31 1 8
69 Ceramic products. 19 31 1 9
28 Inorgn chem; compds of prec mtl, radioact element 5 30 1 10
52 Cotton. 17 30 1 11
76 Aluminium and articles thereof. 20 30 1 12
94 Furniture; bedding, mattress, matt support, cushi 18 29 1 13
25 Salt; sulphur; earth & ston; plastering mat; lime 8 27 1 14
90 Optical, photo, cine, meas, checking, precision, 4 26 1 15
30 Pharmaceutical products. 9 26 1 16
83 Miscellaneous articles of base metal. 18 24 1 17
55 Man-made staple fibres. 18 23 1 18
38 Miscellaneous chemical products. 8 22 1 19
10 Cereals 50 19 1 20
42 Articles of leather; saddlery/harness; travel goo 16 18 1 21
96 Miscellaneous manufactured articles. 19 17 1 22
34 Soap, organic surface-active agents, washing prep 17 16 1 23
82 Tool, implement, cutlery, spoon & fork, of base m 13 15 1 24
61 Art of apparel & clothing access, knitted or croc 20 13 1 25
72 Iron and steel. 18 12 1 26
32 Tanning/dyeing extract; tannins & derivs; pigm et 10 10 0 27
66 Umbrellas, walking-sticks, seat-sticks, whips, et 18 7 0 28
21 Miscellaneous edible preparations. 15 7 0 29
59 Impregnated, coated, cover/laminated textile fabr 16 7 0 30
53 Other vegetable textile fibres; paper yarn & wove 20 7 0 31
63 Other made up textile articles; sets; worn clothi 20 5 0 32
91 Clocks and watches and parts thereof. 20 5 0 33
49 Printed books, newspapers, pictures & other produ 9 4 0 34
95 Toys, games & sports requisites; parts & access t 20 4 0 35
60 Knitted or crocheted fabrics. 20 4 0 36
37 Photographic or cinematographic goods. 17 4 0 37
92 Musical instruments; parts and access of such art 12 4 0 38
35 Albuminoidal subs; modified starches; glues; enzy 9 3 0 39
33 Essential oils & resinoids; perf, cosmetic/toilet 16 3 0 40
74 Copper and articles thereof. 12 2 0 41
17 Sugars and sugar confectionery. 15 2 0 42
11 Prod.mill.indust; malt; starches; inulin; wheat g 35 2 0 43
27 Mineral fuels, oils & product of their distillati 6 1 0 44
89 Ships, boats and floating structures. 6 1 0 45
- 15
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12/01/2010 Good day!
The relationship between BOD and COD that your site gave is very useful!
I would like to know your reference book about this relationship, that is, the name of the book, its author, and its copyright date.
I would greatly appreciate your help.
Hoping to hear from you very soon.
With much hope and gratitude,
Liza
6/25/2011 I think that a typo error is present at the paragraph where it is written :
0.90 = BOD5/BODu as per ---1
0.77 = BODu/ThOD as per ---2