External Debt Of Nigeria, Others To Hit $1.29tn In Three Years – Afreximbank

…Nigeria Among Top 10 African Countries With High External Debt

Africa’s external debt is projected to reach $1.29trn by 2028 as Nigeria was listed among the ten African nations accounting for 69 per cent of the continent’s total external debt, according to a recent report by Afreximbank Research.

The report, titled ‘African Debt Outlook: A Ray of Optimism’ and released in February 2024, underscores the persistent debt challenges facing African nations while highlighting potential strategies for economic stabilization.

It revealed that in the first half of 2024, ten African nations collectively held 69 per cent of the continent’s total external debt stock, an increase from 67 per cent in 2023.

Nigeria alone accounts for eight per cent of Africa’s total external debt, making it one of the largest debt holders on the continent. Other countries with significant external debt burdens 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).

The report attributed the rise in Africa’s external debt to limited development in domestic financial markets, high interest rates, and an increasing demand for foreign exchange to finance imports.

Additionally, reliance on aid, concessional loans from multilateral institutions, and competitive credit rates from private lenders have compounded the debt burden.

Since 2008, Africa’s external debt has surged significantly, reaching approximately $1.16trn by 2023, which represents 60 per cent of the region’s total public debt.

Projections suggest a modest increase to $1.17trn in 2024, with a continued upward trajectory expected to push the figure to $1.29trn by 2028.

This growth is largely driven by rising financing needs, fueled by rapid population expansion and economic development requirements.

According to Nigeria’s Debt Management Office (DMO), the country’s total public debt climbed to N142.3trn as of September 30, 2024, reflecting a 5.97 per cent increase (N8.02trn) from N134.3trn in June 2024.

Debt servicing in the first three quarters of 2024 exceeded N7trn, driven by increased obligations to multilateral and bilateral creditors, as well as significant interest payments on commercial loans.

Despite its debt burden, Nigeria has continued to leverage international capital markets to finance its fiscal needs. In December 2024, the country issued a $2.2bn Eurobond, with expectations of further issuances as global interest rates decline.

However, the report cautioned that while lower rates may ease immediate fiscal pressures, macroeconomic risks such as currency depreciation and dwindling foreign reserves persist.

Afreximbank’s research highlights the broader factors contributing to Africa’s rising debt, including extensive borrowing for infrastructure development, healthcare, and education.

The aggregated debt-to-GDP ratio has surged by 39.3 percentage points since the 2008 global financial crisis, reaching 71.7 per cent in 2023.

The report further noted that elevated global interest rates have intensified debt-servicing difficulties, particularly for countries borrowing from non-traditional creditors such as private sector entities and emerging bilateral partners. As a result, many African nations face increased fiscal pressure, necessitating urgent policy responses.

To navigate these challenges, Afreximbank proposed targeted policy measures to ensure fiscal sustainability. Strengthening value-added tax systems and leveraging digital tax collection could enhance revenue generation.

Redirecting public expenditures toward high-impact sectors such as healthcare, education, and infrastructure may improve economic stability.

Implementing performance-based budgeting would ensure resources are allocated efficiently, yielding measurable outcomes.

Establishing well-resourced Debt Management Offices tasked with monitoring debt sustainability and improving risk assessment capabilities could also help manage fiscal pressures.

Afreximbank concluded that while Africa’s debt challenges remain significant, signs of medium-term stabilization are emerging. Factors such as reduced interest rates, improved access to capital markets, and macroeconomic tailwinds could support fiscal sustainability across the region as countries navigate the post-crisis recovery landscape.

ENDS

External Debt Of Nigeria, Others To Hit $1.29tn In Three Years – Afreximbank is first published on The Whistler Newspaper