NIGERIA-CHINA REFINERY DEAL & JONATHAN'S ASPIRATIONS

Nigeria and China signed a Memorandum of Understanding that would permit the Chinese government to build 3 refineries and a petrochemical complex in the country. The refineries will be built in Lagos, Nigeria's commercial capital, Kogi State, and Bayelsa State, the home state of President Jonathan. Nigeria already has four refineries which do not function efficiently. This fact forces the country to import 85% of the fuel used domestically and leads to frequent fuel scarcity and long lines at fuel stations in the world's 8th largest oil exporter.

SPECIFICS
China is already the largest investor on the African continent and this deal, worth $23 billion, only expands China's influence. Both countries will jointly seek financing from Chinese banks for the projects. However, China will provide 80% of the funding while Nigeria will only provide 20%. Once built, management of the refineries and petrochemical complex will be run by the Chinese at least until the value of their financing has been recovered. The refineries will increase current output to at least 750,000 bpd and will create approximately 20,000 Nigerians during the periods of construction and operations. Over the next decade, NNPC desires to eliminate completely, the current flood of imported petroleum products into Nigeria's domestic consumption.

On it's part, Nigerian authorities proclaimed the agreement as a means to

"accelerate the construction of new refineries in Nigeria to stem the flood of imported refined products into the country, currently estimated at 10 billion dollars..."

China described the project as an opportunity to,

"expand its presence on the African continent and establish its footprint firmly in the Nigerian oil and gas landscape."

POTENTIAL BENEFITS
Nigeria is in desperate need of functioning refineries that can meet the demands of its population. Refineries would also enable the country to sell refined oil products to many neighboring countries which could reduce the cost of petroleum in those countries while increasing Nigeria's oil profits. The jobs created by these projects would also be beneficial to the country, considering that as of 2009, unemployment stood at 28.57%. As a results the potential benefits from the agreement could be immeasurable if things are done correctly. However, it is important to verify that the estimated employment gain from these projects will provide short term and long term benefits to the country.

ARE THE EMPLOYMENT ESTIMATES ACCURATE?
It is well known that whenever China embarks on an infrastructural project, the Chinese government imports Chinese citizens and materials to complete the task. While this approach typically ensures that the project in question is completed within a short and reasonable time frame, it also means that domestic labor is excluded from many aspects of construction. Thus, although the Nigerian government asserts that 20,000 jobs will be created over the course of construction and operation. It would be interesting to learn what percentage of overall employment the estimation constitutes.

A POTENTIAL PLUS FOR JONATHAN'S PRESIDENTIAL ASPIRATIONS
It is also crucial to consider the shrewd political maneuvering that this project represents. Although Goodluck Jonathan is yet to announce that he will run for President in 2011, this project suggests that he will. Chinese infrastructural projects are known for being quick and already, construction of the Lagos refinery is scheduled to begin before the end of 2010. Lagos state will provide the land and infrastructure. Consequently, it is reasonable to assume that the Lagos refinery will be underway by the time election season gets into full gear. Jonathan will then be able to point to the refinery construction as evidence of a concrete project that will benefit Nigerians.

AGREEMENTS THAT MAKE SENSE ARE NECESSARY
This tentative petroleum project is not Nigeria's first dance with China and hopefully, it will not end up being as embarrassing as the Chinese built satellite that lost power. In 2008, a Nigerian satellite, NigComSat 1, billed as the first belonging to an African country, lost power while in orbit and triggered jokes about how Nigeria's power problems had gone into space and other similar punch lines. As previously noted, China's approach to infrastructural development abroad is to import Chinese labor and materials. That tactic works to the benefit of the China what with its large population and growing need for skilled labor. By having Chinese citizens work on Chinese projects, China is able to gain crucial foreign ties and influence while satisfying its domestic needs. Given this approach, the recent report that China will also build a 150-bed hospital in Abuja raises some concern. Now, while hospice care is essential for Nigeria which is struggling to produce a working health care system, the hospital agreement is an example of the problems Nigerian contracts sometimes present. It makes little sense to build a 150 bed hospital considering that Nigeria has a population of 150 million that is bound to explode exponentially. Hence, a 150 bed hospital will quickly become crowded and insufficient no matter where it is built, and particularly in Abuja, the nation's political capital which attracts millions from around the country and continent.These are just some examples that highlight the need of the Nigerian government to enter into savvy agreements with China and other entities.

Most Nigerians are simply interested in development and will support any plan that will bring it. This is because for years, citizens have seen one failed project after another and have seen a decline in infrastructural development. Despite the expedient need for help in achieving infrastructural development, it is crucial for Nigeria to be strategic in its partnerships and ensure that agreements provide short and long term benefits. Hopefully, this agreement with China will be a step in that direction, and is not an indication that Nigeria is on the verge of caving in to China's desire to purchase one sixth of the nation's oil reserves as revealed in 2009.

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