Victor Ezeja
AdminAs the biggest trading partner of Sub-Saharan African and market for one-fifth of the region’s exports, any form of slow growth in China would have a ricochet effect across the continent, the International Monetary Fund (IMF) has warned.
The international lender said this is more so as the slow trajectory of China’s economy negatively impacts Sub-Saharan African (SSA) economies like Nigeria where a 1 per cent-point decline in growth could lead to a loss of 0.5 per cent-point on average.
In a statement issued yesterday to warn economies of the negative impact of China’s slowing economic growth, it observed that China has over the past two decades established extensive economic links with the countries of sub-Saharan Africa, establishing itself as the region’s largest single-country trading partner.
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IMF added that most of the manufactured goods and machinery bought by African countries come from China, even as China purchases one-fifth of the region’s exports (including metals, minerals, and petroleum).
It then lamented that the slowdown in the global economy and the subsequent slowdown in China’s manufacturing sector have both hampered the country’s recovery from the pandemic.
On how this slowdown affects Nigeria and other African countries, the statement read, This matters for Africa. A one percentage point decline in China’s growth rate could reduce average growth in the region by about 0.25 percentage points within a year, according to the latest Regional Economic Outlook. For oil exporters, such as Angola and Nigeria, the loss could be 0.5 percentage points on average.”
Prime Business Africa reports that Nigeria’s real Gross Domestic Product (GDP) recorded an annual growth rate of 2.51 per cent during the second quarter of 2023. This is comparatively lower than the 3.54 per cent recorded in the corresponding quarter of last year.
Recent data from the National Bureau of Statistics (NBS) showed that China was Nigeria’s topmost trading partner in the import category, accounting for 22.17 per cent of Nigeria’s total imports. This means that Nigeria basically imported N1.27 trillion worth of goods from China in the second half of 2023.
This was as Nigeria’s debt to China increased from $3.93 billion as of June 30, 2022, to $4.73 billion as of June 30, 2023, showing an increase of $800 million in one year, approximating 0.36 per cent from the second quarter of 2022 to Q2 2023, according to an analysis of the external debt stock data from the Debt Management Office (DMO).
The IMF analysts have now noted that China’s slowing economy triggered a decline in the country’s lending to Sub-Saharan African countries, submitting thus: “The ripple effects of China’s slowing economy extend to sovereign lending to sub-Saharan Africa, which fell below $1 billion last year—the lowest level in nearly two decades. The cutback marks a shift away from big-ticket infrastructure financing, as several African countries struggle with escalating public debt.
“Chinese loans to the region rose rapidly in the 2000s, with the country’s share of total sub-Saharan African external public debt jumping from less than 2% before 2005 to 17% by 2021.
“This makes China the largest bilateral official lender to countries in the region. However, the share of debt owed to China remains relatively small, at just under 6% of the region’s overall public debt, and is mostly owed by five countries—Angola, Cameroon, Kenya, Nigeria, and Zambia.”
On the way out of the precarious situation, the IMF experts harped on the need for countries in sub-Saharan Africa to adjust to China’s slowing economy and dwindling economic engagements by increasing intra-African trade and restocking their reserves, partly by reforming their tax policies and bolstering their revenue administration.
“Efforts to diversify African economies are also vital to sustain future growth. The strong demand for minerals that support renewable energy development could provide an opportunity for countries to forge new trade relationships and develop more local processing capabilities.
“Countries can improve their competitiveness by creating a favourable business environment, investing in infrastructure, and deepening domestic financial markets,” read the statement.
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