The International Monetary Fund has issued a warning to Nigeria and other Sub-Saharan African countries about the risks associated with their close economic relationships with China.
The IMF’s warning comes as it was reported that Nigeria’s debt to China had risen to $4.73 billion as of June 30, 2023.
Nigeria’s external debt profile data from the Debt Management Office revealed that the country’s debt to China increased by $800 million in one year, from $3.93 billion as of June 30, 2022, to $4.73 billion as of June 30, 2023.
The debt includes concessional loans that Nigeria obtained from China to fund various infrastructure projects, such as power generation, railways, water supply, airport terminals, agricultural processing, and communication.
Despite the increasing debt, there has been a significant rise in bilateral trade between Nigeria and China, making the latter the former’s largest source of imports.
This close economic relationship has raised concerns, and the IMF has warned that it exposes Nigeria and other Sub-Saharan African countries to vulnerabilities.
The IMF emphasized that China’s recent economic growth slowdown would negatively affect its trading partners in Sub-Saharan Africa, including Nigeria.
The IMF also pointed out that China has become a major source of funding for infrastructure projects in African countries, including Nigeria, and noted the correlation between the prevalence of bilateral trade and lending disbursement between China and Sub-Saharan African nations.
To address these potential challenges, the IMF suggested that Sub-Saharan African countries adapt to evolving economic ties, increase regional trade integration, strengthen policy frameworks, diversify their economies, and create favorable business environments.
