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Chinese firms swindle Nigerian importers

The managing director of a Lagos-based company, which deals in chemicals, Mr Jude Ekolie (not real name), thought he had a good bargain when he decided to patronise a Chinese company when he was planning to buy merchandise for his firm. Although his fingers had once been burnt in a similar deal in the past, he knew that this was the time to ponder the aphorism of once bitten, twice shy. Risk taking, he had ruminated, is part of entrepreneurship.

Of all the quotations he got, he picked that of Tianjin Jinlaifu Chemicals Company Ltd., Tianjin, China, as the best. But this time he was more careful. So he thought.

In his earlier transaction with another Chinese firm, Hebei Bofate Chemicals Company Ltd, he had on June 15, 2010 wired $2930 through telegraphic transfer for the shipment of water treatment chemicals to Nigeria. But till the time of this report, he had seen neither the goods nor his money. To worsen matters, all efforts to contact the company through its representative, Susan Zhang, came to nought. It had disappeared into thin air.

Given his previous experience, he decided to resort to what he thought was a foolproof method: paying through a letter of credit. His bank, under his instruction, had on August 26, 2010 opened a letter of credit for $14,596.20 with Citibank, New York. Under the terms of payment, the Chinese company is to ship 18.36 metric tonnes of calcium hypochlorite (used for water treatment) to the importer through the Apapa seaport in Lagos.

Payment was to be done through the correspondent bank upon confirmation of the receipt of the chemicals. That did not, however, stop Tianjin Jinlaifu from defrauding him.
But how did the transaction go wrong? Narrating his experience in an interview with Sunday Sun, Ekolie, who was on the Internet chatting with one of the company’s representatives said: “One of the reasons we chose the Chinese was that their price was attractive. While other companies in Europe were quoting around $1,000 per tonne, the Chinese quoted about $600. There was little variation in all the quotations we got from China. So, we settled for Tianjin Jinlaifu with the hope that we would get value for our money.

“Contrary to our agreement, the company shipped to us chemicals that were below the specification we ordered and paid for. We were supposed to be supplied the chemicals in granules. But it was the powder form that was shipped to us. You see, the powdered form is of low quality and it is not a fast-moving product here in Nigeria.”

Shortly after the company received the goods, it asked its bankers, First Bank, to direct Citibank not to honour the letter of credit for now. It brought the matter to the attention of Tianjin Jinlaifu, hoping there was an error that could be rectified. Rather than attend to its complaint, the company gave him a hard choice: ship the goods back. That was when the company knew that it had fallen into the net of another Chinese dupe.

Ekolie said: “We were disappointed. Shipping the goods back is going to be at the detriment of our company. We will require about N1 million to do that. After a long negotiation, the company suggested we should find market for it and sell at a lower price. After that, we instructed our bankers not to pay the full value of the letter of credit.

“Ordinarily, the money should have been paid to the Chinese company after we had received the goods. But our saving grace was that the goods arrived Nigeria before the due date on the letter of credit. So, that gave us enough time to halt the payment as the terms of the transaction had been breached.”
Given his earlier experience, were there no telltale signs that danger was looming? “Yes, there were,” he confesses.

“At the early stage of the transaction, Tianjin Jinlaifu was trying to put some stumbling blocks on our path after we had agreed on the terms of transaction. Shortly after we sealed the deal, the company was delaying the shipment of the goods. On enquiry, its officials advised us that we should buy caustic soda so as to stop Chinese authorities from intercepting the goods. At a stage, we felt the company was only trying to make us part with more money. We began to suspect it had no intention of fulfilling its own side of the bargain,” he added.

Ekolie dismissed claims that his company did not take enough steps to guarantee the fidelity of the transaction and that it should have been suspicious of the low price quoted by the supplier. He said when his company was considering employing an inspection agent to check the goods before shipment, Tianjin Jinlaifu discouraged it, claiming that it could delay the exportation of the goods as Chinese Customs could subject the process to undue bureaucracy.

“Let me say that we knew that we were taking a risk doing business with the Chinese, but risk taking is part of entrepreneurship. Unfortunately for them, there was a delay in payment as we asked Citibank to stay action on payment. Now we have been able to broker a better price deal with them. They set out to defraud us in the first instance. The game plan was to ship the wrong product, get paid before we get to know what hit us.

“Regardless of the very poor credit rating of most Chinese firms, China still remains the second biggest exporter in the world. Not even the United States can ignore the emergence of the Asians.
“That probably explains why Hu Jintao (the Chinese president) got a red carpet treatment at the White House. By 2020, China may overwhelm Germany in the export business. So apart from lower prices from their firms, the Chinese have a lot of things going for them.
“Moreover, there is no entrepreneur who does not take a risk regardless of how astute and successful. There are so many bitter lessons that one cannot learn even from the leading business schools in the world.

“However, I accept the fact that we must learn from our mistakes. Most importantly, it is our desire to enlighten others so they could have a smooth learning curve. When any Nigerian company loses, we see it as a great loss to the nation. That explains why we are crying out,” Ekolie said.
Unfortunately for Ekolie’s company, the matter may drag on endlessly as Chinese police have closed down Tianjin Jinlaifu and arrested some of its officials. Ekolie told Sunday Sun that he learnt that some of those the company had defrauded reported the matter to the police. He, however, decried the attitude of the Chinese Embassy in Nigeria to reports of alleged frauds committed by Chinese companies and individuals.

“When we went to report the matter to the Commercial Section of the Chinese Consulate, located at Idejo Street, Victoria Island, Lagos, the officials were not cooperative. We met other importers with similar tales of woes. Even if you request for a visa to go to China to sort out the problem with the exporter, you are not likely to get it,” he said. Sunday Sun investigation show that many Nigerian exporters of chemicals are victims of sharp practices by their Chinese trading partners. One Nigerian importer was said to have lost over N20million in such a transaction with the Chinese.

Curiously, many of them are not willing to go public with their experience. During visits to Ojota and Ilasamaja, two popular chemical markets in Lagos, some of the traders confirmed that they had had nasty encounters with the Chinese but they declined to give details.

Ekolie attributed this to the need to protect their business. According to him, they deal in regulated products and publicity such as this could raise customers’ suspicion that could affect patronage.
“Many of us deal in a market whose products are regulated by the National Agency for Food and Drug Administration and Control (NAFDAC).

We are trying to avoid the prying eyes of the agency as such reports could make its officials beam their searchlight on us. That will not be good for business,” he said.
Officials of the Commercial Section of the Chinese Consulate in Lagos declined comments on these allegations. A consulate official, who simply identified himself as Jack, told Sunday Sun on the phone that the consulate was closed for business and would not reopen until after two weeks.


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Posted by on Feb 19 2011. Filed under Headlines. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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