China’s presence on the African continent has been widely acknowledged and debated, with financial transactions, infrastructure development and new political ties having been developed over the century, all making the Sino-African relationship stronger. This article examines which pre-conditions exist for successful Sino-Nigerian cooperation in the energy sector, and discusses how these states could enhance each other’s energy security and economic development.

The Sino-African trade relationship

Economic and trade cooperation between China and African states have experienced a monumental upsurge, deepening their interdependency and need for each other’s resources.⁽²⁾ After all, whilst China has become Africa’s largest trade partner, Africa has become a major contract engineering and investment market for China.⁽³⁾ People´s Daily Online, a Chinese Government-owned newspaper, highlighted that the trade value of Sino-African trade had reached US$ 127 billion in 2010, compared to only US$ 10 billion in 2000.⁽⁴⁾ This increase in trade value triggered a new direction in Chinese foreign policy, encouraging Chinese corporations to expand and invest in markets abroad. From these figures, it is clear the Sino-African trade relationship has increased in economic value, but the involvement of major Chinese state-owned enterprises in Africa also adds a political dimension.

Some have suggested that the cooperation between China and Africa is based on historic ties of solidarity against the west. However, whether solidarity is still a prominent factor in determining Sino-African relations is highly doubtful given that Chinese investments have mainly been channelled into oil-producing states.⁽⁵⁾ What then is the African perception of China´s increasing investment? The New Partnership for Africa’s Development (NEPAD) welcomes investments made by major developing states such as China and India, arguing that it presents an opportunity for development. Noting that Africa’s wealth of metals and minerals are in strong demand, NEPAD recognises that “the global economy needs raw materials from Africa to feed its voracious appetite, with the bourgeoning economies of China and India seemingly insatiable.”⁽⁶⁾ Therefore, African leaders are aware of the increased position of importance the region will occupy on the global economic stage – through increasing resource demands from both India and China. The energy sector is particularly noted as a prominent case where competition for African resources is expressed.

China´s demand for oil

A net oil importer since 1993, China currently imports approximately 40% of its oil consumption, making it the second biggest oil importer behind the United States of America.⁽⁷⁾ The stagnation of domestic oil production combined with the state’s rapid economic growth, which constitutes as much as 60% of the state’s total consumption, means that Chinese oil imports will experience a further upswing in the future. Consequently, this demand has become a “transforming factor” for China´s foreign policy and its foreign relations with oil producing states in the so-called Third World.⁽⁸⁾

Two major Chinese oil companies engaged in African oil-trade are the Government-owned China National Petroleum Corporation (CNPC) and China National Offshore Oil Corporation (CNOOC). These companies have faced difficulties in securing new oil fields because China is a relative latecomer into the global oil sector. This increases the importance of oil diplomacy and emphasises its incorporation into foreign strategy. China has itself said its efforts are aimed at cultivating special relations with energy-rich countries, to provide foreign aid and/or project assistance, and sign free trade agreements.⁽⁹⁾

China and India compete for Africa’s oil resources, accelerating and intensifying the bidding for these commodities. However, because China perceives the securing of oil resources as an issue of national security, it tends to take a tougher stance, outbidding all other parties, even when profit is minimal. Many Indian corporations for instance, have been outbid numerous times, which only further intensifies the competition over African energy resources.⁽¹⁰⁾ Secondary to securing oil supplies, China’s other long-term motivation for oil diplomacy is the realisation of China as a “global player in the international oil market.”⁽¹¹⁾ This oil diplomacy has enabled Government-owned Chinese oil companies to gain access to many African oil fields,⁽¹²⁾ including those in Nigeria.

Nigeria´s increasing demand for renewable resources

Nigeria, just as many other African states, suffers from a phenomenon known as the ‘natural resource curse.’ This refers to the choice by states, which are in possession of valuable natural resources, to favour a particular resource and to develop their state in such a manner that that resource becomes the state’s main source of economic revenue, while all other sources of income are neglected. Nigeria is heavily dependent upon its oil exports,⁽¹³⁾ But it is also endowed with an abundance of other natural energy resources, including natural gas, coal and lignite, hydropower, solar radiation, wind, biomass (fuels such as wood, animal and plant wastes) and nuclear,⁽¹⁴⁾ indicating the availability of both renewable and non-renewable energy resources.

The supply of energy from fossil fuels among Africa’s developing states is insufficient, with one-third of the continents population dependent upon traditional biomass for cooking and heating.⁽¹⁵⁾ This trend is also seen in Nigeria, where as much as 81.3% of the state’s total energy consumption results from combustible renewable sources and waste. This compares to only 18% being sourced by fossil fuels such as oil and gas, while hydropower development (0.4%) has the least share in terms of energy consumption.⁽¹⁶⁾

Total energy consumption in Nigeria 2010 Fig 1 ⁽¹⁷⁾

The energy sector in Nigeria is underutilised as a result of limited Government investment combined with rapid growth of energy demand. For instance, per capita electricity consumption is approximately 125 kWh in Nigeria, while in China it is 1379 kWh.⁽¹⁸⁾ In addition, the majority of businesses rely on electric generators that burn fossil fuels ⁽¹⁹⁾ indicating the need for the development of a sustainable electricity sector that is both accessible and available.

As with many other developing states, Nigeria’s economic growth is hampered by insufficient energy access – especially in terms of electricity. The correlation between energy and economic growth had often been highlighted, with some saying that “access to substantial quantity and quality energy infrastructures is essential to rapid and sustainable economic development”.⁽²⁰⁾ In 2012, approximately 60% of the roughly 150 million strong Nigerian population lacked access to electricity and instead depended on traditional forms of energy sources such as kerosene and firewood.⁽²¹⁾ This leaves only 40% of total population connected to the national grid, with the rural areas constituting the main areas left without access to electricity.⁽²²⁾ One must be reminded that while the agricultural sector is the primary source of income for most Nigerians, providing employment for as many as 60% of the population, secondary industries are slowly developing and are challenged by insufficient electricity access.⁽²³⁾

There is a general consensus that electricity generates societal development and is an efficient tool in poverty reduction. Henceforth, it could be argued that a lack of adequate energy infrastructure challenges the socio-economic development pattern of Nigeria.  Together with the increasing global emphasis on a sustainable development pattern, scholars and policy makers alike have focused on the development of renewable energy resources. Sustainable development emphasises “the development that meets the needs of the present without compromising the ability of future generation to meet their own needs.”⁽²⁴⁾ Since Nigeria’s domestic fossil fuels reserves contribute to environmental pollution and are limited, developing energy infrastructure systems based on renewable energy is considered more sustainable from a long-term perspective.

Sino-Nigerian prospects: Oil-for-hydropower?

China’s investments in African oilfields are perceived to enhance local socio-economic development, as well as ensure the availability of oil in global markets,⁽²⁵⁾ and this is especially true in Nigeria, which is one of China’s top 10 trading partners on the African continent.⁽²⁶⁾ China’s interests in Africa’s resources are dictated by a policy that emphasises infrastructure investment in return for these resources. For instance, China helped Nigeria to design, fund, build and launch a satellite in return for an “oil deal.”⁽²⁷⁾ These kinds of arrangements have become a crucial part of Chinese oil diplomacy, and African states like Nigeria very often benefit in terms of infrastructure investments, enabling them to further develop and diversify their energy sector. These deals are not strictly international either. For example, major Chinese corporations CNPC and CNOOC receive incentives from the Chinese Government in the form of financial assistance when securing oil deals in Nigeria.⁽²⁸⁾ Very limited quantities of Nigerian oil, as seen in the graph below, reaches Chinese shores, while China’s financial contributions in terms of Foreign Direct Investment (FDI) to the country has increased  drastically during the last decade, doubling from US$3 billion net FDI in 2003 to approximately US$ 6 billion in 2005.⁽²⁹⁾ Because the lion’s share of this investment (75%) was devoted to the oil and gas sector,⁽³⁰⁾ this indicates that the relationship between Nigeria and China is based on energy sector.

Destination of Nigerian crude oil exports, 2011 Fig 2 ⁽³¹⁾

While Nigeria heavily relies on fossil fuels as a source of electricity, there is an increased awareness of the benefits in diversifying to renewable energy.⁽³²⁾ Hydropower development, which represents only  0.4% of Nigeria’s consumption, is in its initiation phase, with 200 hydropower stations in Nigeria all being operated by diverse actors, including the national state water board, River Basin Development Authority (RBDA) and private owners.⁽³³⁾ Currently 14% of Nigeria’s potential hydropower generation capacity is installed, representing approximately 30% of total installed grid connected electricity generation capacity of the country.⁽³⁴⁾ Development of Small Hydropower (SHP) projects have been globally acknowledged as a sustainable and effective energy solution due to its inherent advantages in terms of reduced environmental impact and efficient electricity generation, not to mention facilitating irrigation, flood prevention, navigation and fishing. Therefore, SHP projects present an effective solution for rural electrification, which is currently a major problem when it comes to electricity access in Nigeria.⁽³⁵⁾

Conclusion

China has become a global leader in hydropower development, and is willing to export its expertise to African states as a part of its oil-diplomacy. Sino-Nigerian relations could therefore become even more successful if an ‘oil-for-hydropower’ or even ‘oil-for-energy infrastructure’ became the basis for their cooperation. Both states face energy security challenges, especially in the long term. Therefore, both states have resources the other needs, thus putting in place the necessary pre-conditions needed for a successful, mutually beneficial cooperation that could secure both parties long-term energy need, while simultaneously securing each other’s economic development.

Written by Zeynep Erdal ⁽¹⁾

NOTES:

(1) Contact Zeynep Erdal through Consultancy Africa Intelligence's Asia Dimension Unit (asia.dimension@consultancyafrica.com).
(2) ’China, Africa seek common development through trade’, People’s Daily Online, 20 May 2011, http://english.people.com.cn.
(3) Ibid.
(4) Ibid.
(5) Taylor, I., 2006. China´s oil diplomacy in Africa. International Affairs, 82(5), pp. 937-959.
(6) Subramoney, S., ‘Africa has the advantage – it now needs to win the game’, NEPAD, 2 June 2010, www.nepad.org.
(7) Zhang, Z., 2007. China´s hunt for oil in Africa in perspective. Energy and Environment, 18(1), pp. 87-92.
(8) Ibid.
(9) Chen, S., 2008. Motivations behind China’s foreign oil quest: A perspective from the Chinese Government and the oil companies. Journal of Chinese Political Science, 13(1), pp. 79-104.
(10) Zhang, Z., 2007. China´s hunt for oil in Africa in perspective. Energy and Environment, 18(1), pp. 87-92.
(11) Ibid.
(12) Ibid.
(13) Ogunkola, E. O., Bankole, A.S., and Adewuyi, A., ‘China‐Nigeria economic relations’,  African Economic Research Consortium Scoping Studies on China‐Africa Relations, 2008,  www.aercafrica.org.
(14) Oseni, M.O., 2012. Households’ access to electricity and energy consumption pattern in Nigeria. Renewable and Sustainable Energy Reviews, 16(1), pp. 990-995.
(15) Ajayi, O.O., 2009. Assessment of utilisation of wind energy resources in Nigeria. Energy Policy, 37(2), pp. 750–753.
(16) ‘Country analysis brief: Nigeria’, US Energy Information Administration, 16 October 2012, www.eia.gov.
(17) Ibid.
(18) Oseni, M.O., 2012. Households’ access to electricity and energy consumption pattern in Nigeria. Renewable and Sustainable Energy Reviews, 16(1), pp. 990-995.
(19) Oyedepo, S.O. 2012. On energy for sustainable development in Nigeria. Renewable and Sustainable Energy Reviews, 16(5), pp. 2583–2598.
(20) Oseni, M.O., 2012. Households’ access to electricity and energy consumption pattern in Nigeria. Renewable and Sustainable Energy Reviews, 16(1), pp. 990-995.
(21) Ibid.
(22) Ibid.
(23) Ibid.
(24) Oyedepo, S.O. 2012. On energy for sustainable development in Nigeria. Renewable and Sustainable Energy Reviews, 16(5), pp. 2583–2598.
(25) Zhang, Z., 2007. China´s hunt for oil in Africa in perspective. Energy and Environment, 18(1), pp. 87-92.
(26) Taylor, I., 2006. China´s oil diplomacy in Africa. International Affairs, 82(5), pp. 937-959.
(27) Chen, S., 2008. Motivations behind China’s foreign oil quest: A perspective from the Chinese Government and the oil companies. Journal of Chinese Political Science, 13(1), pp. 79-104.
(28) Ibid.
(29) Ogunkola, E. O., Bankole, A.S., and Adewuyi, A., ‘China‐Nigeria economic relations’.  African Economic Research Consortium Scoping Studies on China‐Africa Relations, 2008,  www.aercafrica.org.
(30) Ibid.
(31) ‘Country analysis brief: Nigeria’, US Energy Information Administration, 16 October 2012, www.eia.gov.
(32) Oyedepo, S.O. 2012. On energy for sustainable development in Nigeria. Renewable and Sustainable Energy Reviews, 16(5), pp. 2583–2598.
(33) Akanmu, J.O., Remi-John, O. and Ekpo, I.E., 2011. Overview of dam development in Nigeria. Geotechnical and Geological Engineering, 29(6), pp. 953–960.
(34) Ibid.
(35) Oyedepo, S.O. 2012. On energy for sustainable development in Nigeria. Renewable and Sustainable Energy Reviews, 16(5), pp. 2583–2598.