Via Africa-Asia Confidential, an interesting look at growing discord in the relationship between China and Africa, specifically Nigeria.  As the article notes:

“The catastrophic failure in November of Nigeria’s US$340 million, Chinese-built satellite NIGCOMSAT-1,  launched only a year ago, is the latest, most visible indication of increasing difficulties between Beijing and its most sought-after and elusive partner in sub-Saharan Africa. The communications satellite project had symbolised China’s success in doing business with the region’s largest oil producer, offering technology and capital either unforthcoming from established partners or with fewer political strings. But the failure of the satellite’s power unit after a short time – and criticism of the project’s cost and implementation – suggests serious problems.

The satellite fiasco came amid growing tensions over private and state contracts. On 20 November, Tanimu Yakubu, Chief Economic Advisor to Nigeria’s President Umaru Musa Yar’Adua, announced the government may cancel an $8.3 billion railway modernisation contract agreed in 2006 with China Civil Engineering and Construction Company.

Yakubu said the original contract had not been presented to the National Assembly and might therefore be illegal: ‘For an administration that prides itself in the rule of law, I don’t see how an illegality will be strictly adhered to in the name of continuity,’ he said. There is another problem: the contract price was stated as $7.6 bn. in China. So far, there has been no explanation for the $700 mn. gap between the two sides’ figures.

China raised its profile in the final years of Olusegun Obasanjo’s presidency (1999-2007). In 2005, PetroChina and the Nigerian National Petroleum Corporation signed an $800 mn. deal to supply 30,000 barrels of crude oil per day. In 2006, China National Offshore Oil Corporation agreed to pay $2.3 bn. for a stake in oil and gas fields, and China National Petroleum Corporation agreed $4 bn. for the right of first refusal on four oil blocks, secured with infrastructure credit.

During tours of the continent, China’s then Foreign Minister Li Zhaoxing and President Hu Jintao showed China’s commitment to Nigeria with visits in January and June 2006. They were quick to point out the similarities between Nigeria and China. Both have a rich culture independent of the West, both are the most populous nations and regional leaders in their respective continents and both share a history tainted by colonialism.

China’s rapid Nigerian success in 2005-07 may have partly contributed to its present difficulties. Several agreements with Chinese companies benefited from political backing; their terms do not conform to President Yar’Adua’s stated commitment to the ‘rule of law’. Such issues and associated doubts over China’s commitment have been sharpened by hostilities between supporters of Obasanjo and his successor; Yar’Adua’s officials accuse elements of the previous regime of corruption – and of interference in their efforts to strengthen institutional government.

In the private sector, Aliko Dangote – Nigeria’s biggest industrialist and Obasanjo’s favourite businessman – is working to save a $3.2 bn. cement deal with Chinese partners Sinoma International (AAC Vol 1 No 5). Sinoma said the Dangote Group raised the possibility of a delay in the start of construction on some projects but negotiations were continuing.

China’s close links to the Obasanjo’s government only partly explain current difficult relations. Uncertain market conditions, with falling prices for the oil and gas that constitute more than 90% of Nigeria’s export earnings, and a recession in key Chinese export markets are hitting expectations on both sides.

Nigerian officials may predict a rise of more than 10% in gross domestic product for 2009, but few outsiders share this optimism in the face of the global slowdown. If it continues, Nigeria’s capacity to finance infrastructure projects and China’s interest in what has proved an awkward market may dwindle further.

Meanwhile, the Manufacturing Association of Nigeria has threatened to picket the Chinese Embassy in Abuja and President Yar’Adua has rebuked China, warning of the consequences of further dumping of cheap goods in Nigeria’s markets. But on 14 November, Shenzhen Energy and Nigeria’s First Bank announced a $2.4 bn. deal for a 3,000 megawatt power project:  that should be welcomed by Yar’Adua’s team, as it would nearly double national electricity capacity.

With the third China-Africa Forum scheduled for Cairo in 2009, China’s relationship with Africa, and specifically Nigeria, faces new challenges. Professor He Wenping of the Chinese Academy of Social Sciences called it the next big step in China-Africa policy, predicting wider and deeper involvement. Professor He said that China would transfer factories to Nigeria in the medium to long term, but said strong mutual commitments were needed to make such projects a success.

A key test will be the Lekki Free Trade Zone near Lagos, which was boosted in November by the Nigerian Port Authority’s agreement on plans for a $6 bn. deep water port connected to the zone. Chinese companies account for 60% of the LFTZ ownership, the rest is held by the Nigerian government. The LFTZ, meant to house power plants and manufacturers, is linked by its own road network. For Chinese firms, this looks a more reliable investment than projects which are more exposed to Nigeria’s infrastructure problems.

Chen Xiaoxing, Chinese head of the LFTZ, said its goal is to ‘build up a modern Chinese-type industrial city in Lagos under the leadership of the Lagos state government while helping first-rate Chinese enterprises to develop themselves abroad.’ The second phase aims to cover 150 square kilometres with heavy industry, manufacturing, chemicals, petroleum processing, pharmaceuticals, automobiles and banking. Chen said that the area would create 300,000 jobs for Nigerians. The success of the scheme relies on Nigeria resolving its own political difficulties and better international market conditions.”