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Cablegate: China's Growing Presence in Nigeria

VZCZCXRO5871
PP RUEHMA RUEHPA
DE RUEHUJA #2003/01 3060654
ZNR UUUUU ZZH
P 020654Z NOV 09
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 7387
INFO RUEHOS/AMCONSUL LAGOS PRIORITY 2210
RUEHBJ/AMEMBASSY BEIJING 0051
RUEHGH/AMCONSUL SHANGHAI 0001
RUEHSH/AMCONSUL SHENYANG 0003
RUEHCN/AMCONSUL CHENGDU 0001
RUEHGZ/AMCONSUL GUANGZHOU 0001
RUEHJO/AMCONSUL JOHANNESBURG 0109
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 03 ABUJA 002003

SENSITIVE
SIPDIS

DEPT PASS USTR-AGAMA AND EXIM- JRICHTER, ANGIUONI
DEPT PASS TO USTDA-PAUL MARIN
JOHANNESBURG FOR NAGY
TREASURY FOR IERONIMO, BARCAN, SOLOMON AND RITTERHOFF
DOC FOR 3317/ITA/OA/KBURRESS AND 3130/USFC/OIO/ANESA/DHARRIS

E.O. 12958:N/A
TAGS: ECON ETRD EINV EFIN PGOV NI
SUBJECT: CHINA'S GROWING PRESENCE IN NIGERIA

REF: A. LAGOS 271

ABUJA 00002003 001.2 OF 003


SENSITIVE BUT UNCLASSIFIED-HANDLE ACCORDINGLY

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SUMMARY
-------

1. (SBU) China's presence in Nigeria is growing. There are 200 to
300 Chinese businesses in the country while the bilateral trade
between the two countries is estimated at $7 billion for 2009.
China's dependence on oil is encouraging its oil companies, such as
CNOOC and Sinopec, to take an interest in Nigeria's oil fields.
Chinese companies are investing in the non-oil sector but the
investments are minimal when compared to the oil sector investments.
Nigerians are interested in Chinese investments but not in the
Chinese labor that most Chinese companies bring with them. The
Chinese population in Nigeria is estimated at 20,000-50,000. END
SUMMARY.

-----------------
CHINESE COMPANIES
------------------

2. (SBU) Economic Counselor and Banking and Finance Officer met
with Chinese Economic and Commercial Counselor and Economic Officer
on October 15 to discuss the business environment in Nigeria. The
Economic and Commercial Office's eight officers work on issues such
as trade, investment, economic assistance, economic cooperation and
business disputes. The Chinese Economic and Commercial Counselor
noted that there are 200 to 300 Chinese enterprises in Nigeria, most
of which are small private enterprises owned by one or two people.
Only 50 to 60 enterprises are medium or large, and are under
supervision of the Chinese Economic and Commercial Office.

--------------------------------
TRADE REACHED $7 BILLION IN 2009
--------------------------------

3. (U) The People's Republic of China and the Federal Republic of
Nigeria established diplomatic relations on February 10, 1971.
Bilateral trade was $856 million in 2000, $3 billion in 2006, and $7
billion in 2009. China imports petroleum, timber and cotton, and
exports light industrial mechanical and electrical products. China
sees Nigeria as a key market in Africa for its cheap goods.
According to Chinese officials quoted in the local press, Nigeria is
China's fourth largest trading partner in Africa.

---------------------------------
CHINA'S DEMAND FOR OIL IS GROWING
---------------------------------

4. (SBU) Former Nigerian President Olusegun Obesanjo (1999-2007)
encouraged Chinese state companies to acquire oil blocks in Nigeria
in return for Chinese commitments to invest in infrastructure
projects, but the scheme eventually failed because of no viable
mechanism to implement and enforce deals. No Chinese-led
infrastructure project was actually executed, including the
widely-discussed proposed building of a Lagos-Kano railway.

5. (SBU) China's high dependence on imported oil has encouraged its
state-owned oil companies to explore overseas oil fields. Nigeria's
crude oil production was 1.8 million barrels per day in September
2009, but potential production could be as much as three million
barrels per day. The Chinese oil companies National Offshore Oil
Corporation (CNOOC) and Petroleum and Chemical Corporation (Sinopec)
QCorporation (CNOOC) and Petroleum and Chemical Corporation (Sinopec)
operate in Nigeria and are looking to expand their operations.

-----
CNOOC
-----

6. (SBU) CNOOC entered Nigeria in 2006 when it acquired a 45
percent interest in a major oil field, OML130, for $2.2 billion.
Production began in March 2009. CNOOC also purchased a 35 percent
interest in OPL299 for $60 million. According to local press

ABUJA 00002003 002.2 OF 003


reports and industry speculation, it seeks to acquire six billion
barrels of oil in 23 blocks for $30 billion, or the equivalent of
one in every six barrels of Nigerian proven reserves. Its bid for
oil blocks could put the Chinese into competition with Shell,
ExxonMobil, Chevron, Total, and Agip, the current operators of these
blocks.

-------
SINOPEC
-------

7. (SBU) Sinopec purchased existing producer Addax Petroleum, a
Swiss company, for $7.2 billion in June 2009. Previous Chinese
activity in Nigerian exploration and production ventures took the
form of minority investments in fields or oil blocks operated by
other companies or in the proposed oil-for-infrastructure deals
(Reftel A).

------------------
TELECOMMUNICATIONS
------------------

8. (SBU) Chinese companies are making small investments in the
non-oil sector, mostly in the information and communications
technology (ICT) sector. The Chinese Economic Counselor noted in
the October 15 meeting that China's presence in telecommunications
is largely in equipment and supply because the local
telecommunications sector is dominated by South African companies.

9. (SBU) Huawei, China's largest telecoms-equipment company, signed
an agreement with the Ministry of Communications for the
introduction of new ICT in Nigeria. Huawei also supplies fiber
optic cables and modems for Internet service.

10. (SBU) HIS Nigeria Plc, a leading telecom infrastructure provider
in Nigeria, uses Chinese companies for its supply of towers,
batteries, gensets and fences. ICT has great potential in Nigeria,
and China supplies a good portion of the equipment needed to make
ICT operations run.

----------------------------------------
DEVELOPMENT OF THE LEKKI FREE TRADE ZONE
----------------------------------------

11. (SBU) Chinese firms signed an agreement with the Lagos state
government to build the multi-million-dollar Lekki Free Trade Zone
(FTZ). The Jiangling Economic Development Zone of China is the
primary developer of Lekki FTZ whose ultimate objective is a new
model city and to become a mega industrial, commercial, financial,
tourism and recreational hub. Chinese press reports highlight the
Chinese government's hopes to use Lekki FTZ as a major market for
promoting Chinese goods.

12. (SBU) Nigerians appear to be interested in Chinese investment
but are wary of it at the same time. International press reports
claim that some Nigerian officials are concerned about the Chinese
practice of importing Chinese workers who could exacerbate local
resentment, particularly in the Niger Delta where there are major
grievances over the lack of employment opportunities. Nigerians are
adamant about using local labor and not bringing large numbers of
Chinese laborers into the country. This is evident in the
development of Lekki FTZ, which has Chinese involvement but without
large numbers of Chinese workers.

-------------------------------------
THE IMPACT OF CHINESE TEXTILE IMPORTS
-------------------------------------

13. (SBU) Lack of power and cheap Chinese textile imports have
Q13. (SBU) Lack of power and cheap Chinese textile imports have
devastated the local textile industry. According to the local
press, more than 65 textile mills have closed in Nigeria and more
than 150,000 Nigerian textile workers have lost their jobs over the
past ten years. More than one million other Nigerians, such as
traders and cotton farmers, have also suffered from the down-sizing
of the textile industry.


ABUJA 00002003 003.2 OF 003


14. (SBU) The Chinese are adept at making counterfeit "Nigerian"
fabric. Virtually all of the 10,000 vendors at the major market in
Onitsha source their goods from China. Cheap Chinese products and
lack of local transportation and power infrastructure make it
cheaper to be a trader than a manufacturer in Nigeria.

----------------------------
THE LOCAL CHINESE POPULATION
----------------------------

15. (SBU) There are an estimated 20,000-50,000 Chinese living in
Nigeria, including 20,000 at "Chinatown" in mainland Lagos. Most
Chinese are located in the larger cities, such as Lagos, Abuja and
Kano. The number of cultural and tourist exchanges, such as the
visiting Chinese dance troupe which performed in Abuja for PRC
National Day on September 30, may continue to increase with the
growth of Chinese business interests in Nigeria. China's Southern
Airlines flies directly to Lagos three times a week, with a fueling
stop in Dubai, and the airline would reportedly like to increase the
frequency of these flights.

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COMMENT
-------

16. (SBU) China's presence in Nigeria will continue to grow in both
the oil and non-oil sectors. However, China's bids for existing oil
blocks, potential joint ventures with international oil companies,
and purchases of oil will dominate China's involvement in Nigeria
for the foreseeable future. Elsewhere, China may continue to sign
ambitious Memorandums of Understanding, such as the failed
oil-for-infrastructure agreements, where concrete results will be
difficult to achieve.

17. (U) The Embassy coordinated this telegram with ConGen Lagos.

SANDERS

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