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An economic slowdown in China, the world’s biggest oil importer, will drag down global oil prices, adding to more worries for Nigeria which is Africa’s largest producer of crude oil.
Nigeria’s gross domestic product (GDP) expanded by 2.5%, a slower-than-expected pace, in the second quarter (Q2) of 2023, after the oil sector contracted for a 13th straight quarter.
Analysts tell MoneyCentral that as the world’s second-largest economy, a prolonged slowdown in China will hurt, rather than help, the rest of the world.
An analysis from the International Monetary Fund shows that when China’s growth rate rises by 1 percentage point, global expansion is boosted by about 0.3 percentage points.
“With a shrinking labor force and diminishing returns to capital investment, Chinese growth in coming years will depend on boosting declining productivity growth,” the IMF said.
The value of Chinese imports has fallen for nine of the last 10 months as demand retreats from the record highs set during the pandemic. The value of shipments from Africa, Asia and North America were all lower in July than they were a year ago.
Africa and Asia have been the hardest hit, with the value of imports down more than 14% in the first seven months this year, according to Bloomberg data.
Despite efforts by OPEC+, the producers’ group led by Saudi Arabia and Russia, to shore up prices by curbing supply, the deteriorating demand outlook in China ,remains a lingering concern for traders.
West Texas Intermediate traded around $80 a barrel after the US benchmark suffered weekly losses over the past two weeks.
Nigeria has been trying to ramp up production to reach its full OPEC+ quota but has been beset by ongoing supply disruptions, theft and pipeline vandalism.