The Bilateral Relationship
Nigeria and China 23 years ago signed a bilateral relationship in which investments that will eventually lead to infrastructural development, job opportunities, exportation, inventions, and several beneficial packages that would help both parties grow were established.
This bilateral relationship later saw several companies like the China Railway Construction Corporation (CRCC), PowerChina International Group Limited, TBEA Xinjiang Sunoasis Co., Ltd, China Energy Engineering Corporation (CEEC), Shanghai Dredging Company Limited, and others bring immeasurable development to Nigeria.
On May 15, 2007, officials of the Zhongshan Funcheng Industrial Investment Co., Ltd with Zhang Jinghua as the managing director and Huang Guangyu as the organization’s chairman went into agreement with the Ogun State government. This agreement flagged the creation of a Free Trade Zone the Ogun-Guangdong Free Trade Zone(OGFTZ) Project.
The OGFTZ was established in Igbesa, Ado-Odo/Ota Local Government Area, key areas endowed with plenty of natural mineral resources. This agreement was entered into during the leadership of Governor Ibunkule Amosun and the Commissioner for Commerce and Industry-Bimbo Ashiru.
Zhongshan Cement Company Limited, a subsidiary of the Zhongshan Fucheng Industrial Investment Co., Limited, invested in producing high-quality cement in the Nigerian market and potentially for export to other West African countries.
Financial Support From Investors
The Free Zone project received funding from the following organizations:
- Zhongshan Government of China-$600m.
- Ogun State Government-$200m.
- China Development Bank (CDB)- $300m loan.
- Industrial and Commercial Bank of China (ICBC)-$200m loan.
- China Exim Bank-$150m loan.
- Central Bank of Nigeria (CBN)- $100m loan.
- Guaranteed Trust Bank (GTB)-$50m loan.
- First Bank of Nigeria (FBN)-$50m loan.
- Zhongfa Group (Chinese Company)- $100m equity investment.
- Sino-Nigeria International Investment Company (Chinese Company)- $50m equity investment.
- Ogun State Investment Corporation (Nigerian Company)- $20m equity investment.
Why did the Dispute Erupt?
- Zhongshan claimed that the Ogun State Government owes them $47.8m in unpaid debt and interest.
- Ogun State Government bridge and terminated the contract citing non-performance from the Chinese company.
From Dispute to Law Suite
The bilateral relationship had since been a healthy one between the government and the Chinese Company until 2015 when a dispute erupted.
Adjudication started in 2016 and by 2019, the arbitration tribunal awarded $70m against the Federal Government of Nigeria- a co-defendant, irrespective of the fact that Zhongshan built a barrier fence around the Trade-Free zone.
The Government’s Follow-Up Actions
The Ogun State Government heeded legal advice and took actions to restrict enforcement of the award. This action was fruitful in 8 different jurisdictions while they waited for appeals against recognition orders that were issued in the United States and the United Kingdom.
Several attempts were made by the Ogun State Government to have a discussion that may lead to a settlement on reasonable terms. In 2023, with the presence of Abubakar Malami the Attorney General of the Federation (AGF), Dapo Abiodun the Governor, Minister of Justice, Lateef Fagbemi, and other officials of the State government, a meeting was held in London with the Chinese company.
After the meeting, everything looked as though the resolution step would dissolve the pressing issue at that time as the Chinese initially showed interest and were ready to consider the offer presented by Nigerian officials. The Company had a change of mind the following day due to reasons best known to them. They insisted that the government pay for the full arbitration debt.
The mediation was fruitless as both parties agreed to meet in the first quarter of 2024 but the Chinese Company had since then gotten involved in a series of enforcement proceedings that led to the Judicial Court of Paris issuing an order in favor of Zhongshan, allowing them to seize Nigerian assets abroad including 3 of the national jets.
Implications of the Dispute
- Damage to Infrastructural Development: Zhongshan’s projects in Nigeria like roads, and power plants, may be delayed or canceled due to the lingering lawsuit.
- Loss of Investment: Zhongshan Funcheng Industrial Investment Co., Ltd may fully withdraw its investment from Nigeria and this will further lead to loss of jobs and capital.
- Reduced Revenue for the Government: The country may experience a loss of tax revenue and other benefits they have been enjoying through the bilateral relationship.
- Loss of Diplomatic relationship: Nigeria could be prone to a derailed diplomatic relationship between Nigeria, China, and other countries worldwide.
- Currency Fluctuation: This dispute may cause the instability of the Nigerian national currency. It can lead to Nigeria’s reduced foreign exchange in exporting crude oil and other natural resources, which will lead to a continuous devaluation of the Naira.
- Reputational Damage: The reputation of both parties may be painted dirty as this is a very sensitive matter. The Company may be shown the way out of the country due to such an attempt to cause reputational damage.
Conclusion
Zhongshan’s crazy call for the seizure of 3 Presidential Jets in an international court has so far not been fruitful.
Meanwhile, as a result of this action Nigeria as a country stands with several risks such as reputational damage, loss of confidence from investors, devaluation of national currency and Zhongshan also may put their investment and all other benefits they are enjoying on the line.
It is required that both parties resolve the lingering case using Dispute Resolution Techniques (DSR), as this will continue to bind the existing cordial relationship between Nigeria and China.
