A report by Afreximbank Research has revealed that Nigeria accounts for 8 per cent of Africa’s total external debt.
The report, titled, ‘African Debt Outlook: A Ray of Optimism’, showed that 10 countries on the continent collectively hold 69 per cent of the continent’s debt.
The report, which highlights the challenges and opportunities facing African nations in managing their debt, stated that in the first half of 2024, 10 African nations constituted 69 per cent of the continent’s total external debt stock, up from 67 per cent in 2023.
The other countries leading in external debt are 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).
“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 $1.16tn and representing 60 per cent of the region’s total public debt stock as of 2023. Projections indicate a slight increase to $1.17tn in 2024, with sustained growth anticipated, potentially reaching $1.29tn by 2028,” the report read.
It further stated that trend is driven by the continent’s increasing financing requirements, largely due to population growth pressures.
The Afreximbank Research also cited broader issues that have contributed to Africa’s increasing debt burden, including infrastructure development, healthcare, and education costs in emerging markets, which often necessitate extensive financing through loans and other debt instruments.
The report noted that the aggregated debt-to-GDP ratio surged by 39.3 percentage points post-2008 GFC, reaching 71.7 per cent of GDP in 2023.
Elevated global interest rates have further complicated the landscape, amplifying debt-servicing challenges, particularly given the significant borrowing from non-traditional creditors, including private sector entities and emerging bilateral partners.
The report pointed out that as central banks continue to lower rates, further issuances are expected, easing immediate fiscal concerns even though macroeconomic stability remains fragile, with risks such as currency depreciation and low foreign reserves.
According to AFREXIM Bank, for Nigeria and other African countries to weather the storm, targeted and actionable policies must be in place.
It further said policymakers must prioritise robust fiscal measures, engage strategically with debt relief initiatives, promote long-term growth, and advocate reforms to the global financial architecture.
“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,” the report pointed out.
