As Nigeria’s debt to China hits $4.73bn, IMF cautions African countries on economic ties

The IMF has warned Nigeria and other countries in Sub-Saharan Africa about the risks of their close economic ties with China.

This warning comes as Nigeria’s debt to China has risen to $4.73 billion as of June 30, 2023, according to the Debt Management Office (DMO). This debt consists of concessionary loans that Nigeria obtained from China to finance various infrastructural projects, such as power generation, railways, water supply, airport terminals, agricultural processing, and communication.

Some of the projects being financed by Chinese loans are the Nigerian National Public Security Communication System project, Wu-Kaduna section of the railway modernization project, Abuja light rail project, Nigerian Information and Communication Technology infrastructure backbone project, Abuja, Lagos, Kano, and Rivers airport terminals’ expansion project, Zungeru hydroelectric power project, 40-parboiled rice processing plants project, Lagos-Ibadan section of the railway modernization project, and rehabilitation/upgrading of the Abuja-Keffi-Markurdi road project.

Nigeria has cleared the first Chinese loan of $200 million, which was agreed on in 2006 to finance the Nigerian Communications Satellite project, with an additional payment of $40.02 million in interest.

Nigeria’s increasing debt to China reflects the strong economic ties between the two countries. Cui Jianchun, Chinese Ambassador to Nigeria, wrote on the website of the Ministry of Foreign Affairs of the People’s Republic of China that bilateral trade between Nigeria and China increased by nearly 142 percent from 2016 to 2021. He also stated that in the first ten months of 2022, the bilateral trade volume reached $20.04 billion. Nigeria is China’s third-largest trading partner in Africa, and China is Nigeria’s largest source of imports.

However, the IMF has cautioned that Nigeria and other Sub-Saharan African countries are vulnerable to the slowdown in China’s economic growth, which will have negative impacts on their trade and investment. In its latest Regional Economic Outlook, released in October 2023, the IMF noted that Sub-Saharan African countries have benefited from their economic ties with China over the last two decades, as China has become the region’s largest trading partner, a major credit provider, and a significant source of foreign direct investment.

But the IMF also pointed out that China’s support for Africa has faced some criticism and that China has reduced its financing activities in Sub-Saharan Africa due to its slow growth and reduced risk appetite. The IMF projected that China’s future growth deceleration will affect African trading partners negatively over the medium term, mainly through reduced trade. The IMF also observed that funding for infrastructural projects will suffer if China withdraws from its commitments to sub-Saharan African countries.