Rising China Trade To Stretch Financing Needs Of Nigeria, Others — BMI

Nigeria and other Sub-Saharan African (SSA) economies are expected to face rising financing pressures in 2026, even as trade with China intensifies and supports near-term growth, according to analysts at BMI, a Fitch Solutions company.

BMI said that while mainland Chinese lending and direct investment into Africa have slowed in recent years due to shifting domestic priorities in Beijing, China’s engagement with SSA markets remains strong through trade.

The analysts expect the growing trend of China redirecting goods exports to SSA to persist into 2026, driven largely by rising protectionism in the United States and other advanced economies.

BMI noted that higher US tariffs on Chinese goods, alongside a wave of anti-dumping investigations and restrictive trade measures in Europe, Canada, South Korea, India and Australia, have made African markets, particularly large economies such as Nigeria, an increasingly attractive alternative destination for Chinese exports.

Chinese exports to Africa have risen by 20.4 per cent since March, a trend analysts expect to continue next year, further deepening the trade deficit between China and the continent.

The report also pointed to growing geopolitical engagement, citing China’s public support for Nigerian sovereignty following accusations and threats by US President Donald Trump to halt aid and consider military action against the country.

According to BMI, such diplomatic signals underscore Beijing’s strategic interest in maintaining strong political and economic ties with key African partners.

On the import side, Chinese purchases from SSA are also expected to increase, supported by Beijing’s June 2025 decision to remove all tariffs for African countries with which it maintains diplomatic relations.

This policy extends zero-tariff treatment beyond least developed countries and is expected to boost African exports to China.

However, BMI cautioned that because China continues to import largely unprocessed commodities from SSA while exporting higher-value manufactured goods, the structural trade imbalance is likely to widen further in 2026.

Despite rising global trade tensions, the analysts said the direct impact of US tariff measures on SSA consumers is likely to remain limited.

Many SSA economies, including Nigeria, have relatively low export exposure to the US or primarily export products that are exempt from tariffs. In addition, strong global demand for commodities such as Ethiopia’s coffee and Guinea’s bauxite continues to support key supply chains.

Nevertheless, BMI highlighted several domestic headwinds that could constrain growth in parts of the region. These include fuel subsidy reductions, electricity supply constraints in parts of Central and Southern Africa, tight public finances that limit government spending, and persistent security risks in the Sahel.

In South Africa, household consumption is expected to moderate as administered costs rise and labour market conditions remain weak, acting as a mild drag on regional growth.

Even so, the analysts said SSA’s overall growth outlook for 2026 remains broadly supportive, underpinned by lower borrowing costs, contained inflation and resilient consumer demand across much of the region.

On the fiscal front, BMI forecasts that regional fiscal consolidation will resume in 2026, with the GDP-weighted fiscal deficit narrowing slightly to 3.6 per cent of GDP from an estimated 3.8 per cent in 2025.

However, financing needs in nominal US dollar terms are expected to climb to $82.5bn, the highest level since 2021.

Traditionally, governments in the region have relied on a mix of concessional financing, domestic debt issuance and commercial eurobond sales to cover funding gaps, with limited use of central bank financing.

While these sources will remain dominant, BMI expects a greater use of alternative and innovative financing instruments in 2026.

The analysts attributed this shift to several constraints. They noted that SSA has already utilised about 170 per cent of its International Monetary Fund quota as of October 2025, up sharply from 45 per cent in February 2020 and nearing levels last seen during the structural adjustment era of the early 1980s, limiting the scope for further IMF support.

In addition, domestic capital markets across the region are becoming increasingly saturated with government securities, pushing up local yields, crowding out private-sector borrowing and heightening systemic exposure to sovereign risk.

At the same time, despite easing global financial conditions and renewed investor appetite for higher yields, SSA eurobonds continue to be issued at historically high coupon rates, locking in elevated debt-servicing costs at a time when interest payments are already consuming a growing share of government revenues.

BMI noted that while stronger trade ties with China may provide short-term support for growth in Nigeria and across SSA, widening trade imbalances and rising financing needs will pose significant policy and debt management challenges in 2026.