Nigeria, alongside 9 different African nations, accounts for 69 per cent of the continent’s whole exterior debt inventory, based on a brand new report by the African Export-Import Bank (Afreximbank).
The report, African Debt Outlook: A Ray of Optimism, highlights Nigeria’s vital debt burden, putting it among the many prime three most indebted nations, with 8 per cent of Africa’s whole exterior debt.
It identifies South Africa as the biggest debtor with 14 per cent of Africa’s exterior debt, adopted by Egypt at 13 per cent.
Morocco and Mozambique every account for six per cent, whereas Angola holds 5 per cent. Kenya and Ghana have 4 per cent every, and Côte d’Ivoire and Senegal maintain 3 per cent every.
The report attributes the excessive ranges of debt to exterior borrowing pushed by underdeveloped monetary markets, volatility in international trade earnings, and the necessity for infrastructure financing.
It learn, “Within the first half of 2024, ten African nations constituted 69 p.c of the continent’s whole exterior debt inventory, up from 67 p.c in 2023. The nations main this metric are South Africa (14 p.c), Egypt (13 p.c), Nigeria (8 p.c), Morocco (6 p.c), Mozambique (6 p.c), Angola (5 p.c), Kenya (4 p.c), Ghana (4 p.c), Côte d’Ivoire (3 p.c), and Senegal (3 p.c).”
Nigeria’s debt burden in context
Nigeria’s share of Africa’s exterior debt highlights its reliance on worldwide borrowing to finance funds deficits and important infrastructure. The nation has persistently accessed Eurobond markets, concessional loans from multilateral establishments, and different exterior financing choices to bridge income gaps. Afreximbank estimates Africa’s whole exterior debt inventory at $1.16 trillion in 2023, with projections indicating a rise to $1.29 trillion by 2028.
Nigeria stays a key participant in worldwide capital markets, issuing a $2.2 billion Eurobond in December 2024 to handle debt obligations.
The report highlights the rising function of personal collectors in Africa’s debt construction as multilateral establishments just like the World Bank and IMF reduce lending.
With non-public collectors providing higher-yield devices, many African governments, together with Nigeria, are turning to Eurobonds to finance fiscal shortfalls. Whereas this strategy supplies fast capital, it additionally carries dangers, as industrial borrowing tends to come back with larger rates of interest and shorter maturities than concessional loans.
The report classifies Nigeria’s debt threat as “average” alongside South Africa and Morocco. Nonetheless, it warns of rising exterior borrowing prices amid tighter international monetary circumstances. Africa’s common price of borrowing surged to eight.2 per cent in 2024, considerably larger than the steady 5.4–6.3 per cent vary noticed between 2008 and 2019.
With curiosity funds accounting for an rising share of presidency income, Nigeria faces extra fiscal pressures.
Afreximbank highlights that in 2024, the ratio of curiosity funds to authorities income in Africa peaked at 27.5 per cent, up from 6.8–19 per cent in earlier years. This mounting debt service obligation continues to pressure budgets and restrict fiscal flexibility.
A altering debt panorama and optimistic projections
Regardless of the rising debt burden, Afreximbank maintains an optimistic outlook, forecasting a gradual decline in Africa’s debt-to-GDP ratio from 69.9 per cent in 2024 to 61.7 per cent by 2028.
For Nigeria, improved fiscal administration, financial diversification, and enhanced entry to capital markets are anticipated to assist stabilise its debt trajectory.
Beneficial macroeconomic circumstances, steady rates of interest, and enhancing credit score rankings are cited as elements that would ease debt considerations throughout Africa.
The report notes that nations comparable to Ethiopia, Sudan, and Zambia have benefited from debt restructuring below the G20 Widespread Framework and the Paris Membership, a mannequin Nigeria may discover if vital.
World financial easing is one other issue shaping the outlook for debt. The U.S. Federal Reserve and different main central banks have begun decreasing rates of interest, a transfer anticipated to decrease borrowing prices for African economies, together with Nigeria.
Whereas Afreximbank presents an optimistic medium-term outlook, it additionally outlines dangers that would undermine debt sustainability. Weak home income mobilisation stays a serious problem for Nigeria, given its dependence on oil revenues, which exposes the nation to exterior shocks.
The nation’s excessive fiscal deficits necessitate additional borrowing, rising publicity to international rate of interest fluctuations. Foreign money depreciation stays one other threat, as a weaker naira raises the price of servicing exterior debt.
Afreximbank recommends that nations undertake stronger debt administration methods, together with enhancing tax income assortment, partaking with debt aid frameworks, and diversifying the economic system by investing in manufacturing, agriculture, and renewable power.
The report additionally requires reforms within the international monetary system to make sure fairer lending phrases and higher entry to concessional financing for African economies.
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