china and nigeria will harford 1 an old nigerian proverb states that "a man cannot sit down...
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China and NigeriaWill Harford
An old Nigerian proverb states that "a man cannot sit down alone to plan for prosperity"
Hypothesis
The strength of the unique relationship between China and Nigeria is a consequence of
• Nigeria’s abundance of Resources
• Nigeria’s Low Labour Cost
• Nigeria’s massive population
• Cultural affinity between the two nations
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Contents
• Investigate the economic reasons for the relationship.• Why is the relationship unique? • What does this relationship mean in terms of the continued economic
growth of both countries?
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• The US, as a consequence of the LA Riot’s required an alternative supply of low cost goods resulting in happier US consumers.• 52 Deaths, 2,500 injuries, at least $446million to $1bn USD in property damage.• Deployment of 10,000 California National Guard Soldiers and more than 3,500
US soldiers and Marines.• 12,111 arrests
• Protecting US jobs was no longer a requirement.• In 1982, demand existed in the US for production that would lower the
consumer cost for basic items.• This demand did not involve high technology
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China’s boost in the world of trade.
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• China’s large labour allowed them to respond to the demand for cheap manufactured goods in the US. • In 1992, China was not considered an HPAE• GDP $422.7 billion• Population of 1,165,000,000• GDP per Capita $362.81
• In 2014, China has the second largest GDP in the world• GDP $9.469 trillion• Population of 1,357,380,000• GDP per Capita $6,959
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China’s boost in the world of trade.
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China in 1992
• Solow Growth Model: Y=f(K,L,T)• China had large, underutilized
labour force• Limited capital• Limited Technology
China in 2014• Solow Growth Model:
Y=f(K,L,T)• China had large, better utilised
labour force• Large capital• Development of disruptive
technologies
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China’s boost in the world of trade.
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• ‘China's educational horizons are expanding. Ten years ago the MBA was virtually unknown but by 2004 there were 47,000 MBAs, trained at 62 MBA schools. Many people also apply for international professional qualifications, such as EMBA and MPA; close to 10,000 MPA students are enrolled in 47 schools of higher learning, including Peking University and Tsinghua University.’• Limited information is available detailing Chinese education when
contrasted with other countries.• Human Capital developed is different to other East Asian human
capital
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Lets also consider China’s human capital
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• Limited publicized conflict within the country suggesting a high level of harmony.• How can we tell : Confucian ethics promoted by Xi Haung promoting
the short text written by Li Yuxiu (around 1661-1722) titled, Di Zi Gui• Xi Jinping recommended the text that promotes absolute compliance
with leaders.• The World’s Most Popular Leader: China’s President Xi
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China’s social capital
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• Mao Zedong denounced Confucianism• Hong Kong dissent• After Deadly Riots, Ethnic Tensions Heat Up in Urumqi• China Xinjiang riots toll 'rises to 35'• A dangerous year: Economic
conditions and social media are making protests more common in China—at a delicate time for the country’s rulers• Up to 21 dead, doctor says, as anti-China riots spread in Vietnam
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China’s social capital
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• Yes, why because growth is slowing, resources are diminishing and China is simply catching up.• GDP=F(K,L); Capital grows with economy and Labour is expected to
slow.• Growth Models• Labour is expected to level out shortly, however there are numerous
countries supplying labour to china.• Capital is available because of the limited expenditure required for a
production economy, rather, its saved/invested!
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Is China approaching convergence?
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• The paper ‘When Fast Growing Economies Slow Down: International Evidence and Implications for China’ suggest’s China’s growth will begin to slow in 2015. http://www.nber.org/papers/w16919.pdf• China must advance to the next growth curve. So how do they do it?• They must increase their Total Factor Productivity or TFP.• As we approach convergence, China must consider methods to raise their TFP
as well as consider new methods that will allow them to continue on the existing curve.• Today, China now has reached the point where they must either accept
convergence or jump to a new curve with continued growth as a result. • Like the US in 1992 China has a Demand, but what for?
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Now China needs something new!
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• China’s working age population fell by 2.44 million to 919.54 million in 2013, marking the second consecutive year of decline, the National Bureau of Statistics (NBS) reported.• It noted that the number of migrant workers (living outside their
home province) increased by 3.4% last year. • The income of migrant workers rose by 21.2% in 2012• China’s labour force
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China’s growing demand: Labour
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• China is constantly searching for new markets that demonstrate a demand for goods/services that it can supply.• China's new tech rules play to local firms' strengths
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China’s growing demand: Demand
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• China’s access to Natural Resources is large for many items except oil.• As of 2010 China consumed 455 million tons oil of which over 200
million tons were imported. China's oil demand is expected to increase by 6% in 2011 according to PetroChina. In 2013 the pace of China's economic growth exceeded the domestic oil capacity and floods damaged the nation's oil fields in the middle of the year. Consequently, China imported oil to compensate for the supply reduction and surpassed the US in September 2013 to become the world's largest importer of oil.http://en.wikipedia.org/wiki/Petroleum_industry_in_China
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China’s growing demand: Natural resources
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• The countries GDP can be increased with a larger workforce, greater access to Oil or they could just increase their Productivity.• How can China increase their TFP?• We must consider Endogenous Growth Theories. Japan and Korea
demonstrated high growth levels with the following factors of TFP.• Human Capital
• Education• Social Capital
• Harmony, Law & Order, Lack of Corruption• Government Policies
• Industrial Policy, Export Promotion
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US in 1992 is similar to China
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• Riots throughout China
• The Chinese government must lower costs for its population.
http://www.cnbc.com/id/101918928
http://m.bbc.com/news/world-asia-china-26414016
http://www.forbes.com/sites/joelkotkin/2014/10/13/the-unrest-in-hong-kong-and-chinas-bigger-urban-crisis/
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US in 1992 is similar to China
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• To supply its demand for labour, fulfil its demand for natural resources and to introduce the products/services it provides to new markets!
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China’s search for its new partner
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Sure China’s involved in trade with lots of African nations.
Angola Nigeria South AfricaLow Cost Natural Resources (Oil)
2 1 3
Low Cost Labour Yes Yes Yes, close to China’s.
New Market (pop) 21.47m 173.6m 52.98m
GDP/Capita (USD) 2003 2013
Angola 920.10 5,783.37
Nigeria 510.42 3,005.51
South Africa 3,624.94 6,617.91
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Sure China’s involved in trade with lots of African nations.
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Labour Force Angola Nigeria South Africa
Population (2013) 21.47 173.6 52.98Estimated 2050 (UN) 440Estimated 2100 (UN) 914Urbanisation 54% 50% 62%
Average Age 17.9(Median) 17.9 25(Median)
TFR(2011,2013) 6.3 5.5 2.55 (2005-10)TFR(URBAN) 4.6 4.7TFR(RURAL) 7.7 6.2Language Portuguese English Zula
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Nigeria South Africa Angola
Oil Reserves 37.2 billion barrels 0.15 billion barrels 10.5 billion barrels
Literacy Rate 68.00 86.40 67.40
GDP/Capital $2,500 $10,700 $8,200
Corruption 27 43 19
• Large Supply of Natural Resources.• Low cost manual labour.• Requirement to work.
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Africa
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• Nigeria has the seventh largest population in the world.• Largest population in sub-saharan Africa; 173.6m, almost 20% of Africa’s
population.• 50.4% Islam, 48.2% Christianity of which 74% are Protestant and 25% are
Catholic• According to a BBC world service poll, Nigeria is the most pro-Chinese country
in the world with 85% of the population recognizing China’s influence as positive.• Member of OPEC• strong economic growth between 2003 and 2010 – averaging 7.6%• Oil accounts for close to 90% of exports
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A Closer look at Nigeria
23http://data.worldbank.org/country/nigeria
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Nigeria: Some numbers
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• Remittances represented 6.7% of GDP in 2007• Export more than 2.2m barrels/day• Brain Drain – estimated 21,000 Nigerian doctors, in the US• 100-188 million cubic feet of natural gas (largest in the world)• 32-36bn barrels oils
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Nigeria
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• Nigeria appears to be increasing its human capital• The education system is divided into Kindergarten, primary
education, secondary education and tertiary education• Attendence rate for secondard education is 29%• 68% of the population is illiterate (75% of men and 60% of women).• Female Literacy is less than 35% in Northern Nigeria and more than
90% in areas surrounding the southern delta.
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Nigerian Education
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• Nigeria ranks 54th with respect to the human poverty index (HPI) - making it the 20th poorest country in the world. • It is also ranked 30th in gender related development index
(GDI) while occupying 40th position from below in its human development index (HD1).
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Nigeria – Social Capital
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• By 2004, the savings rate for Nigeria stood at 6.4 percent (Chinese savings rate is greater than 50%)• GDP/Capita was $792 in 2009 according to Mthembu-
Salter, Gregory. (2011). • GDP/Capita is increasing at an increasing rate.• According to the WorldBank, Nigeria’s Gini rating was in
the 4th quintile between 1995-1999.
What Drives Private Saving in Nigeria
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Nigeria – Frugality
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• 76.3% of the Nigerian Labour Force is employed.• Unemployment rate is 8.5%• Hard to find accurate means of measurement.
YOUTH AND LABOUR MARKET OUTCOMES IN NIGERIA: EVIDENCE FROM NATIONAL LABOUR MARKET SURVEY
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Nigeria – Hard work
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• Strict division between the north and the south• Boko Haram, want to implement Sharia Law across Nigeria.• Over 250 sub-ethnicities, speaking over 500 different languages
Boko Haram crisis: How have Nigeria's militants become so strong?
Conflict in the Niger Delta
Boko Haram insurgency
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Nigeria – Social Harmony
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• Obasanjo left power in 1979 and Shehu Shagari became President until 1983• Shehu Shagari was deposed by Major-General Muhammadu
buhari until he was toppled two year later.• Major-General Ibrahim Babangida then held power until it was
seized in 1993 by defence minister, Sani Abacha.• Sani Abacha remained in power until his death in 1998
(apparently in company of two prostitutes).• 2007: The first ever transfer of power between two civilians in
Nigeria’s post independence history. (although the results were not endorsed by the EU or the US)
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Nigeria - Leadership
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• Dr. Oby Ezekwesili while speaking at the 42nd convocation ceremony of the University of Nigeria Nsukka (UNN) stated that $45 billion in foreign reserves and $22 billion in the Excess Crude Account were unaccounted for by the Yar’Adua-Jonathan administration• According to the Corruption Perception Index(CPI),
Nigeria ranked 136/175 with a CPI of 27/100 in 2014.http://www.transparency.org/cpi2014/results
http://www.transparency.org/cpi2014/in_detail
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Nigeria - Leadership
What unique about it?
• According to a 2014 BBC World Service Poll, 85% of Nigerians view China's influence positively, with only 10% expressing a negative view, making Nigeria the most pro-Chinese nation in the world.• Both nations also signed a USD311 million agreement to develop cooperation
in communications and space programs• Nigeria’s abundance of natural resources and China’s demand for those same
resources.• Nigeria’s high corruption, low beaurocratic quality and democratic accountability.• In 2006, China also agreed to grant a loan of $1 billion to Nigeria to help it upgrade
and modernize its railway networks.• Nigeria received over half of all Chinese FDI flows to West Africa between 2004 and
2009.
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http://dspace.africaportal.org/jspui/bitstream/123456789/34031/1/China%20Africa%20book%20(3).pdf?1 P234
International Country Risk Guide (ICRG) (http://www.prsgroup.com/icrg.aspx)
What unique about it?
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Product Label 2002 2003 2006 2008 2010
Value US$
% of Total
Value US$
% of Total
Value US$
% of Total
Value US$
% of Total
Value US$
% of Total
All Products 740.6 100 1068 100 3161.1 100 4292.3 100 7324.4 100Electrical, electronic equipment 105.2 14.2 137.9 12.9 489.8 15.5 743.1 17.3 1821.5 24.9Vehicles other than railway, tramway 86.5 11.7 171.9 16.1 765 24.2 734.9 17.1 1451.4 19.8Machinery, nuclear reactors, boilers, etc 99.3 13.4 255.8 24 431 13.6 814.8 19 1074 14.7Articles of iron or steel 26.3 3.6 31.6 3 80.2 2.5 163.2 3.8 469.3 6.4Rubber and articles thereof 16.4 2.2 21.1 2 64.9 2.1 126.9 3 249.1 3.4Plastics and articles thereof 24.7 3.3 34 3.2 146.2 4.6 174.1 4.1 226.6 3.1Aluminium and articles thereof 6.5 0.9 7.7 0.7 39.5 1.2 143 3.3 162.3 2.2Ceramic products 7.4 1 10.7 1 87.4 2.8 212.1 4.9 159.6 2.2Glass and glassware 4.8 0.6 9.5 0.9 28.1 0.9 64.1 1.5 119.9 1.6Iron and steel 17.9 2.4 18.1 1.7 55.8 1.8 195.1 4.5 116.4 1.6Optical, photo, medical, etc apparatus 20.3 2.7 19.9 1.9 86.4 2.7 67.6 1.6 106.5 1.5Fish, crustaceans, invertebrates 6 0.8 18.1 1.7 69.3 2.2 16.5 0.4 103.1 1.4Organic chemicals 19.8 2.7 28.3 2.6 68.7 2.2 75.8 1.8 97.7 1.3Miscellaneous articles of base metal 6.9 0.9 7.4 0.7 10.6 0.3 34.8 0.8 94.5 1.3Miscellaneous chemical products 29.2 3.9 18.3 1.7 64.1 2 50.6 1.2 85.8 1.2Inorganic chemicals, metal compound 11.7 1.6 18.8 1.8 64.4 2 66.7 1.6 60.8 0.8Tools, implements, etc of base metal 2.7 0.4 3.2 0.3 6.2 0.2 23.7 0.6 58.3 0.8Paper & paperboard, paper and board 18.9 2.6 22 2.1 61.4 1.9 55.6 1.3 53.5 0.7Furniture, prefabricated buildings 7.1 1 9.9 0.9 21.3 0.7 26 0.6 52.7 0.7Stone, plaster, mica, etc articles 2.1 0.3 1.9 0.2 7.8 0.2 14.6 0.3 44.4 0.6Salt, sulphur, earth, and cement 6.9 0.9 25.3 2.4 32.8 1 76.4 1.8 43.4 0.6
Nigerian Imports from China
Source: International Trade Centre (ITC) Data Base (http://www.trademap.org Bilateral_TS.aspx)
Nigeria’s imports from China increased consistently from $740.6 in 2002 to $7.32 billion in 2010
http://dspace.africaportal.org/jspui/bitstream/123456789/34031/1/China%20Africa%20book%20(3).pdf?1
Nigeria imported more (relatively) miscellaneous manufactured products, such as footwear and related articles, from China than the rest of the world
What unique about it?
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Product Label 2002 2003 2006 2008 2010
Value US$
% of Total
Value US$
% of Total
Value US$
% of Total
Value US$
% of Total
Value US$
% of Total
All Products 73.2 123.54 4.134 668.09 1440.8 Mineral fuels, oils, distillation products, etc 71.83 98.1 109.8 88.9 0 0 147.27 22 696.62 48.3Raw hides and skins (other than furskins) and leather 0 0 0.025 0 0.012 0.29 265.53 39.7 592.42 31.1Plastics and articles thereof 0 0 0 0 0 0 266.79 39.9 251.97 7.5Oil seed, oleagic fruits, grain, seed, fruit, etc 0 0 0.006 0 0 0 7.67 1.1 24.66 1.7Ships, boats and other floating structures 0.32 0.4 6.78 5.5 0 0 6.73 1 21.73 1.5Rubber and articles thereof 0.05 0.1 0.54 0.4 0 0 12.19 1.8 13.8 1Footwear, gaiters and the like, parts thereof 0 0 0 0 0 0 0.36 0.1 12.51 0.9Inorganic chemicals, precious metal compound, isotopes 0 0 0.16 0.1 0 0 0.084 0 8.96 0.6Cocoa and cocoa preparations 0 0 0 0 0 0 1.14 0.2 6.77 0.5Machinery, nuclear reactors, boilers, etc 0.74 1 1.81 1.5 2.68 64.83 0.78 0.1 5.57 0.4Copper and articles thereof 0 0 0 0 0.27 6.53 13.32 2 4.64 0.3Electrical, electronic equipment 0 0 0.11 0.1 0 0 0.2 0 4.59 0.3Ores, slag and ash 0 0 0 0 0 0 7.17 1.1 4.37 0.3Miscellaneous chemical products 0 0 0.25 0.2 0 0 0.15 0 2.97 0.2Cotton 0 0 0 0 1 24.19 0.39 0.1 2.41 0.2Wood and articles of wood, wood charcoal 0 0 0 0 0 0 6.02 0.9 1.98 0.1Tobacco and manufactured tobacco substitutes 0 0 0 0 0 0 0.13 0 1.43 0.1Articles of iron or steel 0.25 0.3 2.6 2.1 0 0 0.27 0 1.29 0.1Aluminium and articles thereof 0 0 0 0 0.9 21.77 3.62 0.5 1.25 0.1Live trees, plants, bulbs, roots, cut flowers etc 0 0 0 0 0 0 0 0 0 1.04 0.1
Chinese imports from Nigeria
Source: International Trade Centre (ITC) Data Base (http://www.trademap.org Bilateral_TS.aspx)
Nigeria’s export to China followed the increased trend, although in a relatively moderate way, rising from $73.2 million in 2002 to about $1,440 million in 2010
http://dspace.africaportal.org/jspui/bitstream/123456789/34031/1/China%20Africa%20book%20(3).pdf?1
Hypothesis
The strength of the unique relationship between China and Nigeria is a consequence of
• Nigeria’s abundance of Resources
• Nigeria’s Low Labour Cost
• Nigeria’s massive population
• Cultural affinity between the two nations
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• Are the Nigerians a little more open to Asian culture?• Are the Chinese a little more open to Nigerian culture?• Is cultural affinity the key point in the relationship between the two
nations?• Does this separate China and Nigeria’s relationship from that of
others?
• Sub hypothesis
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Cultural Affinity
• Hypothesis• Economic relationships can strengthen as a result similar normative values
held by individuals.Africa-Asia: Go East Young Man!
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Cultural Affinity
https://globalsociology.pbworks.com/w/page/14711167/Components%20of%20Culture
Robert Ngunyi, a 39-year-old Kenyan who runs an African restaurant, Sky Coffee, in Guangzhou, explains: "You know, I stayed in many countries. But in China there is something that is a bit welcoming."
'No matter how long you live in Japan, you can never be a friend to a Japanese man," said Basil, owner of Treasures Gentlemen's Club in Roppongi.
Japan's Nigerians pay price for prosperity
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• The more powerful the group – and power grows with size and economic wealth – the less likely one is to mix with others.• Nigeria has limited control of its population as a consequence of its
high corruption, low beaurocratic quality and democratic accountability.• China has limited power over its population (per capita). (Need to
prove)• This cultural affinity merges with the other points and ensures a
strong and unique relationship develops between China and Nigeria.
Cultural Affinity
Hypothesis
The strength of the unique relationship between China and Nigeria is a consequence of
• Nigeria’s abundance of Resources
• Nigeria’s Low Labour Cost
• Nigeria’s massive population
• Cultural affinity between the two nations
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• A well known fact is that Nigerian military have benefited from China’s technical assistance form of military training and even supply of military hardware. • Health personnel and different categories of patients patronizing public
health providers are the main beneficiaries of technical assistance offered by China mainly in the roll-back malaria programme. • Nigerian academia have also benefited from the cooperation arrangement
between Nigeria and China especially in the area of exchange programs and promotion of the different culture.• Carlos Leite suggested that increasing human capital will allow Nigeria to
move from its reliance of Natural Resources (40% GDP!)
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What does Nigeria get from this relationship?
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• The Nigerians are not being taken advantage of.• Nigerians will continue on the rocky path towards expansion of their
human capital as a result of the relationship with China.• This relationship will provide the time China needs to increase its
productivity.• The chances of this rosy future have increased as a result of the
similar normative values of the Chinese and the Nigerians.
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The future…
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Thanks!
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