The economic fortune of Nigeria is likely to get affected by the declining growth of China, according to the International Monetary Fund (IMF). It was highlighted by the Fund that owing to the fact that China has built strong economic ties with countries that are located in sub-Saharan Africa over the past two decades, the recent decline in growth which it is currently facing could affect, on an average of 0.5 percentage points, growth in Nigeria.
However, China is regarded at the largest single country trading partner of the sub-Saharan African region. This is because it purchases one-fifth of the exports of the region, which includes metals, fuel and minerals. The IMF noted that the country also makes available the majority of the machinery and manufactured goods imported in the region. It was further said that China’s recovery from the COVID pandemic might affect the whole of Africa. IMF disclosed this under the title: “China’s Slowing Economy Will Hit Sub-Saharan Africa’s Growth.”
Africa should be concerned about this matter.
According to the post, the recovery of the Asian country from the pandemic has recently slowed down due to a property downturn and dwindling demand for its produced goods, just as global growth has also experience a slow pace. Africa is concerned with this matter because a one percentage point decline in the growth rate could lead to a reduction of 0.25 percentage points average growth in a year, as projected by the most recent Regional Economic Outlook.
Furthermore, the Outlook revealed that the adverse effect of the slowing economy of China is beyond sovereign lending to sub-Saharan Africa, which decreased below $1 billion in 2022, indicating the lowest level in almost 20 years. It noted that the cutback indicates a progression from massive ticket infrastructure financing. With China being a major lender to sub-Saharan Africa, loan cutbacks will be felt in Cameroon, Nigeria, Angola, Kenya, and Zambia, where it is considered the largest bilateral lender.
Efforts towards the diversification of African economies are essential.
Also, the IMF stated that countries in the sub-Saharan African region will require adaptability to the growth slowdown and declining economic engagements by developing resilience through heightened inter-African trade, and by redeveloping buffers, as well as tax policy reforms and revenue administration improvements. It was also noted that efforts towards the diversification of African economies are essential for the sustenance of future growth. There is a high demand for minerals that contribute to the development of renewable energy.
This high demand could ensure the provision of an opportunity for countries to build new trade relationships, while developing more capabilities for local processing. Countries can aid improvement of their competitiveness through creation of a favourable business environment, investment in infrastructure, and enlarging local financial markets. It was recently revealed by the Consulate General of China in Lagos, Yan Yuging, that the bilateral trade volume between Nigeria and China, in the first three quarters of this year, 2023, was at $17.25 billion.
Bilateral trade volume between Nig. & China attained $23.9bn in 2022.
Yan Yuging stated that China is an essential trade partner for Africa’s most populous country, Nigeria. The customs data revealed that the bilateral trade volume between Nigeria and China attained $23.9 billion in 2022. It also showed that the exports to Nigeria stood at $22.3 billion. Also, imports from Nigeria had an estimate of $1.6 billion. At the end of December 2022, the aggregate borrowing increased to $4.29 billion, as shown by the Debt Management Office’s data.