IMF Warns African Countries Over Economic Ties With China as Nigeria’s Chinese Debt Rises to $4.73bn

In its latest Regional Economic Outlook on Sub-Saharan Africa, the International Monetary Fund (IMF) has cautioned Nigeria and other countries in the region about the risks of having close economic ties with China.

The IMF’s warning comes as Nigeria’s debt to China reached $4.73 billion as of June 30, 2023, compared to $3.93 billion in the previous year.

This debt includes concessional loans obtained by the Nigerian government to finance various infrastructure projects such as power generation, railways, water supply, airport terminals, agricultural processing, and communication.

China’s loans have been instrumental in supporting projects like the Nigerian National Public Security Communication System, railway modernization projects, airport terminals’ expansion, and many others.

China has become Nigeria’s largest trading partner in Africa, with bilateral trade between the two countries increasing by almost 142 percent between 2016 and 2021.

However, the IMF has warned that close economic ties with China could expose Sub-Saharan African countries to vulnerabilities. The recent slowdown in China’s economic growth is anticipated to have a negative impact on trading partners in the region.

The IMF noted that China’s reduced financing activities in sub-Saharan Africa, coupled with the projected deceleration in its future growth, will likely affect trade and infrastructure funding for African countries.

The IMF also stated that Chinese lending to Sub-Saharan African countries has faced criticism for imposing harsh terms on debtors and using natural resources as collateral. The lack of standardization and transparency in public debt due to inadequate documentation of loans is another concern.

While some economists and financial analysts believe that Nigeria is not at significant risk, the IMF advises Sub-Saharan African countries to adapt to evolving economic ties, promote regional trade integration, strengthen policy frameworks, diversify economies, and create favorable business environments to mitigate potential risks associated with China’s economic slowdown.

November 04, 2023