US-Africa-China Trade: What’s In For CR?

By Abam Ubi
By Abam Ubi
Foreign Direct investments, FDI, is a panacea for the economic growth and well-being of any developing economy. It is believed to bring with it, the inclusive workings of the global community within a nation’s borders , as well as all the dividends desired by various economies especially developing economies like ours; jobs, better infrastructure, better health services, housing and better economic well-being of a people.

Recently, The White House hosted the USA-Africa Economic Summit, a gathering many pundits view as “the USA re-launching itself to challenge the dominance of Chinese trade and investments in Africa”. Bear in mind that Chinese trade with Africa has increased exponentially over the last decade, while the reverse has been the case with the United States. According to the World Trade Organisation, WTO, while Chinese FDI/trade volume with Africa has increased from $500million in 2003 to $210billion in 2013 ; the United states of America, which led FDI in Africa for many years has seen its trade with the continent dwindle from $125billion in 2011 to $85billion in 2013 and it is still falling as at the first quarter of 2014. This is believed to be largely due to the reduction of oil and gas imports from Africa, increased domestic oil & gas production in the USA, as well as reduced non oil imports, dictated by the Africa Growth and Opportunity Act, AGOA ; a unilateral preference scheme of the USA to promote trade and investments in Africa.
However, the recent USA-Africa Economic Summit, where over 50 African Heads of Governments , business leaders (including a few high profile names in the Nigerian business world) , donors and investors gathered with an emphasis on trade rather than the usual aid to the African continent; with indications pointing towards collaborations, Public Private Partnership projects, etc. That the US Government also signed away over $33 billion worth of business investments is an indication of something good to come.

The rhetoric and even reality(s) of (US vs. Chinese) trade with Africa presents an interesting contrast. Despite the gathering of 50 Heads of Government and business leaders from Africa, etc by the Obama administration to boost economic relations, the perceived reason from many quarters is that the USA’s interest in Africa is basically to compete with the expanding Chinese influence on the continent. So far we await the details of the agreements made at the summit. How be it, Africa finds itself in the midst of these two economic giants which interestingly is an opportunity to negotiate a promising future for future generations.

Several economists point to the recent global recession as the reason for the decline of US economic dominance in Africa, as the US had to look inwards to boost economic growth and create jobs thereby changing the downward spiral of the her economy.
Several measures were taken by the US in turning her fortunes around, the most visible being her domestic production of natural gas which resulted in the reduction of oil and gas imports, from which Nigeria has been chief benefactor. It singularly resulted in declining earnings in foreign exchange for Nigeria. (The decline in trade not just in quantity of oil sold, but price as well, ranging from $140 per barrel in 2008 to $32per barrel in 2013). The reduction of quantities sold and shocks in price variation has contributed to our economy bring vulnerable.

Borrowing a leaf from this experience, the intent here is to attempt to explore what could be if Cross River State decides to look inwards to increase its fortunes, develop capacity so as to aid out future trade negotiations and attract investors. Looking inwards will help CRS take stock of her capacity, capability and adequately develop a strategy over time to effectively position her as a desired investment destination in Africa. Given the opportunity of two economic giants, USA -China casting their nets on our continent, it is time to for us to look inwards to this great opportunity, because we have a growing economy, teeming youths with a large percentage of university graduates, skilled labour, abundant mineral resources and vast arable land that will support agriculture, low crime rate, good water ways and a functional sea port that will support maritime transport and infrastructure for export activities, a free trade zone and good social amenities.

When the USA looked inwards post the recession of 2008, the focus was to boost local economy, create jobs, increase Government income, develop new infrastructure while maintaining existing ones. On the other hand, China in looking inwards in the 1990’s and came up with a policy that “any foreign firm operating in china will own a maximum of 49% of production facilities” thereby deliberately forcing partnerships between foreign investing firms and domestic firms. This brought a huge boost to the Chinese economy.

How do we look inwards?
At the moment, Nigeria has an import economy; more than 80% of goods on offer in Nigeria are imported. There needs to be a deliberate policy by the state to reverse this trend, promote export, and increase participation in export activities by citizens with the help of government. Cross River State must begin to help identify markets where indigenous products can be sold. Doing this will engage our citizens job wise, increase commercial activities and cash flow in the state, (an example, the case of pineapple farms and pineapple processing plants to make concentrates for export). She must also engage the private sector to build a factory or processing facilities to process rubber, build new facilities to process our abundant palm produce into palm oil for local consumption and export and palm kennel oil for export and domestic industrial use. Efforts must be made to develop our granite tile making capacity with a view to producing at a cheaper rate compared with imported granite tiles. Doing this will further expand our economy and promote the “ Made in Nigeria” brand. The case of UNICEM is a classic example of adding value to natural resources in the state. What would have been the case if the limestone and gypsum was taken away, processed elsewhere and the cement sold to us at a higher price?

There needs to be a deliberate policy to expand our manufacturing capability given our vast natural and agricultural resources. We can for example, begin to process and export our afang and other products which have put our state on the national and international food map. Surprisingly when I get to buy these products in the UK, which are sold at exorbitant prices, I buy them from Asians who themselves do not eat these products but recognise the commercial gap to be exploited and the food needs of many Nigerians and Africans dwelling in the UK.

We need to encourage people of Cross River decent to invest in CRS especially our politicians who have had financial gains in the course of serving the nation, just like we need to encourage investors to build production facilities like UNICEM is doing and further take advantage of the export processing zone. The Federal Government must be lobbied to dredge the Calabar river on an on-going basis to facilitate the use of port facilities for export while planning to/and building a deep sea port in the south of Calabar as the current port has it’s peculiar logistical challenges. Recall the turn of economic activities in Calabar in 2002-2003 when the FG caused a few ships to berth and offload their cargo in the Calabar sea port and the upsurge in commercial activities around CR. Imagine Calabar seaport being that busy like the Lagos ports are and the band-wagon effect that would have on the state’s economy.

There is also a desperate need to establish a functional chamber of commerce in the state to galvanise businesses and to act as a resource for gathering business related information which will help negotiators make better informed negotiations on our behalf and also pursue investments where the mix of factor conditions is most favourable from a value creation perspective.

Finally, in looking inwards, there must be some form of protectionism in agreements entered. Some local content rules which will help our ailing economy and the creation of a monitoring unit to monitor, evaluate and review trade agreements and advice Government if they are still fit for purpose is important. When we successfully look inwards, the benefits I believe will be profound as there will be more cash flow in the state, transfer of skills and technology, which will spark growth in other sectors of our economy, transfer of management resource that would otherwise not be available. All of this will not only benefit the CR indigenes, but will improve the fortunes of the state in taxes and associated incomes. It is therefore a call to present and aspiring policy makers to bear this in mind and for the electorate to be better informed when planning on who to elect into public office. While I do not hold all the answers, however I have started the discuss on how to elevate our dear state from it’s current state of lack to a better one. Join the discuss, send your views/ contributions that readers and indeed Government can be better informed in making negotiations on our behalf.

Abam Ubi wrote in from the UK.

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