The International Monetary Fund has revealed that Nigeria’s economic situation is expected to be impacted by China’s slowing growth.
The Punch reported that the IMF stated that Nigeria’s economy could be impacted by China’s recent decline in growth by an average of 0.5 percentage points because China has established strong economic linkages with sub-Saharan African nations over the previous 20 years.
China is the region’s biggest trading partner overall, supplying the majority of manufactured goods and machinery imported into the region as well as purchasing one-fifth of the region’s exports, which include metals, minerals, and petroleum, according to the IMF.
However, it pointed out that Africa is now expected to be affected by China’s epidemic recovery. This was disclosed by the Washington-based lender in a post titled “China’s Slowing Economy Will Hit Sub-Saharan Africa’s Growth.’
“Yet, as global growth has also slowed, China’s recovery from the pandemic has slowed recently due to a property downturn and flagging demand for its manufactured goods.
“Africa needs to pay attention to this. The most recent Regional Economic Outlook estimates that a one percentage point drop in China’s growth rate may cut average growth in the region by roughly 0.25 percentage points in less than a year. The average loss for oil exporters like Nigeria and Angola might be 0.5 percentage points.”
It went on to say that sovereign credit to sub-Saharan Africa dropped below $1 billion last year, the lowest level in almost two decades, as a result of China’s faltering economy. It made clear that the reduction signals a move away from large-scale infrastructure funding.
Reduced bank loans are anticipated in Angola, Cameroon, Kenya, Nigeria, and Zambia, where China is the biggest bilateral official lender and a major lender to the region.
The International Monetary Fund observed that sub-Saharan African countries must strengthen their resilience to China’s slowing growth and reduced economic involvement by boosting intra-African trade and reestablishing safety nets, which may involve modifying tax laws and enhancing revenue management.
It went on to say that diversifying African economies is essential to maintaining prosperity in the future.
“The high demand for minerals needed to support the growth of renewable energy could present a chance for countries to establish new trade linkages and strengthen their domestic processing capacities,” it continued. “Nations can raise their level of competitiveness by creating a favorable business environment, investing in infrastructure, and deepening domestic financial markets.”
The bilateral trade volume between China and Nigeria in the first three quarters of 2023 was $17.25 billion, according to information recently released by Yan Yuging, the Consul General of China in Lagos.
“China is a significant trade partner for Nigeria. Chinese customs statistics indicate that in 2022, the two countries’ bilateral commerce volume reached $23.9 billion, with China exporting $22.3 billion to Nigeria and importing $1.6 billion from that country,” he declared.
According to figures from the Debt Management Office, as of the end of December 2022, total borrowing from China had increased to $4.29 billion.