-1741082423021-222018228.png&w=1920&q=75)
- African Export-Import Bank Research said Nigeria and nine other countries collectively account for 69 per cent of the continent’s total external debt
- It attributed the debt profile to the underdevelopment of domestic financial markets, increasing demand for foreign exchange for importation, and high interest rates
- Afreximbank said Nigeria and other African countries can navigate the growing debt landscape by adopting targeted and actionable policies
A report by African Export-Import Bank (Afreximbank) Research has revealed that Nigeria is one of the 10 African countries that collectively account for 69 per cent of the continent’s total external debt.
The report, titled, ‘African Debt Outlook: A Ray of Optimism,’ stated that in the first half of 2024, the continent’s total external debt stock rose to 69 per cent from 67 per cent in 2023.
According to the report, Nigeria accounts for eight per cent of the debt, others include South Africa (14 per cent), Egypt (13 per cent), Morocco (six per cent), Mozambique (six per cent), Angola (five per cent), Kenya (four per cent), Ghana (four per cent), Côte d’Ivoire (three per cent), and Senegal (three per cent).
It attributed the rise in the continent’s external debt stock to the underdevelopment of domestic financial markets, increasing demand for foreign exchange for importation, and high interest rates.
The report noted that the continent’s external debt increased to $1.17 trillion in 2024 and is projected to reach $1.29 trillion by 2028.
“Africa’s external debt levels remain elevated, primarily due to the limited development of domestic financial markets and high interest rates.
“The growing demand for foreign exchange to finance imports has further exacerbated external indebtedness, fuelled by reliance on aid, concessional loans from multilateral institutions, and competitive rates offered by private creditors.
“Since 2008, the external debt of African countries has escalated significantly, reaching approximately $1.16 trillion and representing 60 per cent of the region’s total public debt stock as of 2023.
“Projections indicate a slight increase to $1.17 trillion in 2024, with sustained growth anticipated, potentially reaching $1.29 trillion by 2028.
“This trend is driven by the continent’s increasing financing requirements, largely due to population growth pressures,” the report read.
Persisting challenges
The Afreximbank Research added that the broader issues that contribute to Africa’s increasing debt burden include infrastructure development, healthcare, and education costs in emerging markets, which often necessitate extensive financing through loans and other debt instruments.
It noted that the aggregated debt-to-GDP (Gross Domestic Product) ratio increased by 39.3 percentage points post-2008 GFC, reaching 71.7 per cent of GDP in 2023.
Another factor is increasing global interest rates, which further amplified debt-servicing challenges, especially with increased borrowing from non-traditional creditors, including private sector entities and emerging bilateral partners.
Nigeria, however, gained its way into the international capital markets through Eurobond issuances in December 2024 when it issued a $2.2 billion Eurobond.
The report added further issuances are expected as central banks continue to lower rates. It said this will ease immediate fiscal concerns even though macroeconomic stability remains fragile, with risks such as currency depreciation and low foreign reserves.
How African countries can navigate growing debt profile
Afreximbank noted that Nigeria and other African countries can navigate the growing debt landscape by adopting targeted and actionable policies.
Some of the continental bank’s recommendations include adopting digital tax collection mechanisms to increase tax revenue, a focus on high-impact sector funding, and adopting performance-based budgeting.
It stated, “Africa is navigating a complex debt environment, but the tide can be turned through targeted, actionable policies.
“Policymakers must prioritise robust fiscal measures, engage strategically with debt relief initiatives, promote long-term growth, and advocate reforms to the global financial architecture.
“Below, we outline specific, stakeholder-tailored recommendations, ranked by urgency and impact, and supported by successful examples from countries like Rwanda, Ethiopia, and Kenya.
“Strengthen value-added tax and leverage digital tax collection mechanisms to increase tax revenue. Reassess and redirect public expenditures towards high-impact sectors, including healthcare, education, and infrastructure development.
“The adoption of performance-based budgeting will be critical to ensure that resources are allocated efficiently and yield measurable outcomes and establish well-resourced DMOs tasked with continuously monitoring debt sustainability and enhancing risk assessment capabilities.”
Afreximbank added that African debt is an indication of stabilisation in the medium term, driven by macroeconomic tailwinds, reduced interest rates, and improved access to capital markets.
It noted that while challenges remain, the continent shows a sign of positive fiscal sustainability as it navigates the post-crisis recovery landscape.
40% of African countries face rising debt crisis –ECA
Meanwhile, TheRadar earlier reported that the United Nations Economic Commission for Africa (ECA) raised alarm over rising debts across Africa, saying that 40 per cent of countries on the continent are either in debt distress or at high risk.
The commission said it is worried that most African nations in the crisis are appropriating more funds to debt interest payments than to critical sectors that could stimulate development.
