Nigeria Among Africa’s Heaviest Borrowers as Debt Burden Deepens
3 min read
Nigeria is among ten African nations that collectively hold 69% of the continent’s external debt, according to a new report by Afreximbank Research. The study, titled African Debt Outlook: A Ray of Optimism, sheds light on the growing financial strain across the region, even as policymakers seek solutions to ensure fiscal stability.
Released in late February, the report reveals that Africa’s external debt stock stood at $1.16tn in 2023, with a projected increase to $1.17tn in 2024 and further growth to $1.29tn by 2028. Nigeria accounts for 8% of the continent’s external debt burden, behind South Africa (14%) and Egypt (13%), while Morocco, Mozambique, Angola, Kenya, Ghana, Côte d’Ivoire, and Senegal make up the rest of the heavily indebted nations.
“Africa’s external debt levels remain elevated, primarily due to the limited development of domestic financial markets and high interest rates,” the report states. It notes that heavy reliance on external financing—through multilateral aid, concessional loans, and private-sector borrowing—has left many African economies vulnerable to currency depreciation and rising debt-servicing costs.
Mounting debt and fiscal pressure
Nigeria’s total public debt surged to N142.3tn as of September 2024, marking a 5.97% increase from N134.3tn in June, according to the Debt Management Office. Debt servicing alone exceeded N7tn in the first three quarters of the year, driven by repayments to multilateral and bilateral creditors, as well as high-interest payments on commercial loans.
The report underscores broader structural issues fueling Africa’s debt crisis, including soaring infrastructure costs, healthcare spending, and education financing. Post-2008, the continent’s debt-to-GDP ratio has surged by 39.3 percentage points, reaching 71.7% in 2023.
Adding to these concerns are elevated global interest rates, which have exacerbated the cost of debt servicing, particularly for African nations that have borrowed heavily from non-traditional lenders, including private investors and emerging bilateral partners.
Despite these pressures, Nigeria has continued tapping into international capital markets, issuing a $2.2bn Eurobond in December 2024. The report suggests that further issuances are likely, especially as central banks lower interest rates. However, it warns that macroeconomic stability remains fragile, with risks tied to currency depreciation and dwindling foreign reserves.
Policy recommendations: a path to stability?
While the debt outlook remains challenging, Afreximbank argues that African economies can stabilise their finances through targeted reforms. The report calls for a mix of fiscal discipline, enhanced revenue collection, and strategic debt management to navigate the current landscape.
“Policymakers must prioritise robust fiscal measures, engage strategically with debt relief initiatives, promote long-term growth, and advocate reforms to the global financial architecture,” the report states. It recommends:
Strengthening value-added tax (VAT) collection through digital mechanisms to boost domestic revenue.
Reassessing public expenditure, redirecting funds toward high-impact sectors such as healthcare, education, and infrastructure.
Adopting performance-based budgeting to ensure efficient allocation of resources.
Establishing well-resourced debt management offices (DMOs) to monitor debt sustainability and improve risk assessments.
The report notes that some African countries, including Rwanda, Ethiopia, and Kenya, have successfully implemented similar strategies to enhance fiscal resilience.
Glimmers of hope amid uncertainty
Despite the challenges, Afreximbank sees signs of stabilisation in the medium term. It points to easing interest rates, improved access to capital markets, and macroeconomic tailwinds as potential catalysts for a more sustainable debt trajectory.
Still, with external borrowing remaining a key component of many African economies’ financing strategies, the ability of governments—including Nigeria’s—to implement bold fiscal reforms will be crucial in determining whether the continent can break free from its cycle of debt dependence.
About The Author
