Commodities

David Fickling is a Bloomberg Gadfly columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.

Just when the world thought China was retreating -- pushing acquisitive private companies to relinquish their global shopping sprees -- it looks like Beijing might be getting out its check book again.

China Civil Engineering Construction Corp. will build a $5.8 billion hydroelectric power station in eastern Nigeria, with 85 percent of the funding to come from Beijing's Export-Import Bank, Nigeria's power minister told reporters in the capital Abuja on Wednesday. The Mambilla project, first mooted in the early 1980s, has long been dreamed about as Nigeria's answer to the Three Gorges Dam in China. Its generation capacity of 3,050 megawatts would more than double the country's current hydro potential.

Believe it when you see it.

Despite what ought to be strong mutual interests, the world's biggest energy consumer and Africa's biggest oil producer have a history of misadventures stretching back at least a decade. Wooed by President Hu Jintao in multiple visits during the 2000s as a potential source for the country's voracious petroleum needs, Nigeria's crude exports to China have since fallen behind not just Angola -- which is often a bigger supplier to China than Saudi Arabia -- but even relative minnows such as Ghana, South Sudan and Gabon:

The Best and the Rest
Angola accounts for about two-thirds of China's oil imports from sub-Saharan Africa
Source: China Customs General Administration, Bloomberg, Gadfly calculations

The Mambilla project itself has been dogged by more than a decade of political interference and litigation.

Former President Olusegun Obasanjo once presented it as a model for his plan to grant Chinese companies oil exploration blocks in return for Beijing financing and building major infrastructure. On a 2005 visit to the Chinese capital, he reportedly scribbled an invitation to build the dam onto his business card while meeting China Gezhouba Group Corp., a Three Gorges contractor.

Obasanjo tied Chinese financing for the project to the offer of four petroleum exploration blocks to state-owned Cnooc Ltd. -- but the proposal was canceled after elections in 2007 brought Umaru Yar'Adua to power instead, along with a more skeptical view of such oil-for-infrastructure deals. A revised version was mooted in 2012, bringing in Sinohydro Corp. as major partner -- but that, too, has stalled. In the latest iteration, China Civil Engineering Construction will build the project, according to Nigeria's Power, Works and Housing Minister Babatunde Fashola. Well, we'll see.

To get a sense of why these deals keep failing, it's worth looking at another major Chinese-Nigerian project. U.S. authorities are investigating China Petroleum & Chemical Corp., or Sinopec, over allegations that the state-controlled refiner paid Nigerian officials about $100 million of bribes to resolve a business dispute, people familiar with the matter told Hugo Miller and Tom Schoenberg of Bloomberg News.

Sinopec had bought Geneva-based Addax Petroleum for $7.8 billion in 2009 in part to increase its access to West African crude after the failure of Obasanjo's oil-for-infrastructure push.

The deal hasn't worked out so well: While only paltry amounts of oil have trickled from Nigeria to China, Addax's auditors Deloitte LLP resigned in January after receiving allegations of bribery and embezzlement from whistleblowers. At least $80 million of the payments queried by Deloitte related to an engineering contract for two Sinopec oilfields, according to a filing to the U.K.'s securities regulator.

Things Fall Apart
Nigeria has slipped behind Angola, Mozambique and Ghana as a destination for foreign direct investment
Source: World Bank

Corruption and construction projects in Nigeria go together like jollof rice and chicken, so it's hardly surprising to see Sinopec embroiled in these allegations -- but if an $80 million engineering contract can cause problems, what about a $5.8 billion dam?

There was a point when Nigeria's oil riches made it a natural partner for China -- but as Beijing has diversified supplies, other countries have stepped up. China doesn't care that much about the rule of law in countries where it invests -- but it does care deeply about stability. Nigeria has been unable to provide this, as underlined by the back-and-forth over the Mambilla project and at Addax Petroleum.

Sub-Saharan Africa's most populous nation was for much of the past decade its biggest recipient of foreign direct investment. These days, it trails not just Angola, but Mozambique and Ghana too. When even China's unfussy investors are having second thoughts, you know you're in trouble.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
David Fickling in Sydney at dfickling@bloomberg.net

To contact the editor responsible for this story:
Matthew Brooker at mbrooker1@bloomberg.net