African economies are having a slowdown in their economies as coronavirus hits demand from one of their biggest trade partners, China. This has lowered oil prices and forcing the IMF to downgrade growth forecasts for Nigeria, Africa’s largest economy.
Oil provides more than half of Nigeria’s revenues and 94% of its foreign exchange. IMF slashed Nigeria’s economic growth forecast due to falling oil prices. Oil has fallen to a 13% rate following the reduction in oil demand by the Chinese. This is due to the slowdown in economic activity caused by the coronavirus outbreak.
Nigeria does not supply much oil to China but loses about $500million per month in revenue, for every $10 drop in oil prices. China is a major purchaser of natural resources from Africa. The impact of China’s economic inactivity due to the coronavirus outbreak could have a deep impact on some African economies.
Trade between Africa and China grew by 2.2% in 2019 to $208.7billion, with a slowing Chinese economy. This is less than the previous growth at a 20% rise in 2018. IMF recently cut its forecast for Nigerian gross domestic product (GDP) growth for this year from 2.5% to 2% to reflect the impact of the drop in international oil prices.
Other African countries could be hit far harder than Nigeria. African countries depend heavily on Chinese exports and with the rise of coronavirus, many factories in China shut down, forcing a reduction in the production of goods and services, delaying the export of these goods to Africa, which in turn decreases the supply of goods, even when the demand for these goods is high.
Not much is happening at the moment and it is hoped that the coronavirus epidemic can be contained as soon as possible because the virus has affected the supply chain business in Africa.