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 
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¶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. 
 
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CHINESE COMPANIES 
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¶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. 
 
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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. 
 
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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. 
 
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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. 
 
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SINOPEC 
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¶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). 
 
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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. 
 
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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. 
 
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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. 
 
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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 
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¶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