The International Monetary Fund (IMF) has raised concerns about the potential impact of China’s declining growth on Nigeria’s economic prospects.
Noting the deep economic ties developed between China and sub-Saharan African countries over the past two decades, the IMF predicts a potential average decrease of 0.5 percentage points in Nigeria’s growth due to China’s recent economic slowdown.
China holds a pivotal role in the region as its largest single-country trading partner, accounting for one-fifth of sub-Saharan Africa’s exports, including metals, minerals, and fuel. Additionally, China supplies the majority of manufactured goods and machinery imported by the region.
The IMF’s analysis, outlined in a post titled “China’s Slowing Economy Will Hit Sub-Saharan Africa’s Growth,” underscores the influence of China’s recovery from the pandemic on the African continent. Recent challenges in China, such as a property downturn and reduced demand for manufactured goods globally, have contributed to the economic slowdown.
The report highlights that a one percentage point decline in China’s growth could lead to an average growth reduction of about 0.25 percentage points in the sub-Saharan African region within a year. For oil-exporting countries like Angola and Nigeria, the impact could be more significant, with an average loss of 0.5 percentage points.
Furthermore, the IMF observes the ramifications of China’s economic deceleration on sovereign lending to sub-Saharan Africa, which dropped below $1 billion in the past year, marking the lowest level in almost two decades. This reduction signals a shift away from substantial infrastructure financing.
As China is a major lender to the region, the cutback in loans is expected to affect countries such as Angola, Cameroon, Kenya, Nigeria, and Zambia, where China is the largest bilateral official lender.
To navigate the challenges posed by China’s growth slowdown, the IMF suggests that sub-Saharan African countries should focus on building resilience through increased intra-African trade. Additionally, rebuilding buffers, implementing tax policy reforms, and improving revenue administration are recommended strategies.
Efforts to diversify African economies are deemed crucial to sustaining future growth. The IMF suggests that the strong demand for minerals supporting renewable energy development could present opportunities for countries to establish new trade relationships and enhance local processing capabilities. Creating a favourable business environment, investing in infrastructure, and deepening domestic financial markets are also highlighted as essential measures to improve competitiveness.
Recent data from the Consul General of China in Lagos reveals that bilateral trade between China and Nigeria in the first three quarters of 2023 stood at $17.25 billion. China remains a significant trade partner for Nigeria, with the total bilateral trade volume reaching $23.9 billion in 2022, according to Chinese customs data. China’s exports to Nigeria amounted to $22.3 billion, while imports from Nigeria totaled $1.6 billion. The Debt Management Office reported a total borrowing from China of $4.29 billion as of the end of December 2022.
