The Africa Export and Import Bank (Afreximbank) has identified Nigeria as one of 10 African countries that together account for 69 percent of the continent’s total external debt.
In its latest report, African Debt Outlook: A Ray of Optimism, Afreximbank stated that Africa’s external debt levels remain high due to the underdevelopment of domestic financial markets and elevated interest rates.
“In the first half of 2024, ten African nations constituted 69 percent of the continent’s total external debt stock, up from 67 percent in 2023,” the report reads.
According to the report, South Africa leads with 14 percent of Africa’s total external debt, followed by Egypt (13 percent), Nigeria (8 percent), Morocco (6 percent), Mozambique (6 percent), Angola (5 percent), Kenya (4 percent), Ghana (4 percent), Côte d’Ivoire (3 percent), and Senegal (3 percent).
The bank attributed the rising debt to increased demand for foreign exchange to finance imports, reliance on aid and 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 US$ 1.16 trillion and representing 60 percent of the region’s total public debt stock as of 2023,” Afreximbank stated.
“Projections indicate a slight increase to US$ 1.17 trillion in 2024, with sustained growth anticipated, potentially reaching US$ 1.29 trillion by 2028. This trend is driven by the continent’s increasing financing requirements, largely due to population growth pressures.”
Afreximbank noted that long-term debt remains dominant, accounting for 75 percent of Africa’s total debt, while short-term debt stands at 15.9 percent.
“The continent’s increasing need for financing, especially infrastructure development, requires long-term debt. Between 2008 and 2023, long-term debt increased compared to short-term debt,” the report said.
Providing recommendations to curb external debt, Afreximbank urged resource-dependent countries to prioritize economic diversification.
“For example, Nigeria should invest in agriculture and manufacturing, while Angola should develop its renewable energy sector,” the bank suggested.
The report also called for sustainable borrowing practices, improved debt management institutions, and stronger social safety nets to protect vulnerable populations during economic shocks.
While challenges persist, Afreximbank noted that Africa’s debt situation shows signs of stabilizing due to macroeconomic improvements, lower interest rates, and better access to capital markets. The bank advised governments to reduce fiscal deficits, enhance public expenditure efficiency, improve tax revenue collection, and promote transparency in debt management.
Source: Linda Ikeji Blog