Nigeria, 9 Others Account for 69% of Africa’s Debt – Afreximbank
Nigeria is without doubt one of the 10 African nations that collectively maintain 69 per cent of the continent’s complete exterior debt, based on a report by Afreximbank Analysis.
The report, which was launched late February and titled, ‘African Debt Outlook: A Ray of Optimism’, highlights the challenges and alternatives going through African nations in managing their debt.
The Afreximbank Analysis report said that within the first half of 2024, 10 African nations constituted 69 per cent of the continent’s complete exterior debt inventory, up from 67 per cent in 2023.
It mentioned Nigeria accounts for eight per cent of this debt. The opposite nations main in exterior debt are South Africa (14 per cent), Egypt (13 per cent), Morocco (six per cent), Mozambique (six per cent), Angola (5 per cent), Kenya (4 per cent), Ghana (4 per cent), Côte d’Ivoire (three per cent), and Senegal (three per cent).
“Africa’s exterior debt ranges stay elevated, primarily as a result of restricted improvement of home monetary markets and excessive rates of interest. The rising demand for overseas alternate to finance imports has additional exacerbated exterior indebtedness, fuelled by reliance on support, concessional loans from multilateral establishments, and aggressive charges provided by personal collectors.
“Since 2008, the exterior debt of African nations has escalated considerably, reaching roughly $1.16tn and representing 60 per cent of the area’s complete public debt inventory as of 2023. Projections point out a slight improve to $1.17tn in 2024, with sustained progress anticipated, doubtlessly reaching $1.29tn by 2028.
This development is pushed by the continent’s rising financing necessities, largely as a consequence of inhabitants progress pressures,” a part of the report learn.
In line with the Debt Administration Workplace (DMO), Nigeria’s complete public debt rose to N142.3tn as of September 30, 2024, representing a rise of 5.97 per cent (N8.02tn) in comparison with N134.3tn in June 2024.
Within the first three quarters of 2024, debt servicing was in extra of N7tn on the again of upper obligations to multilateral and bilateral collectors, alongside important curiosity funds on industrial loans.
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The Afreximbank Analysis additionally sheds gentle on the broader points which have contributed to Africa’s rising debt burden. These embrace infrastructure improvement, healthcare, and training prices in rising markets, which frequently necessitate in depth financing by way of loans and different debt devices.
The report famous that the aggregated debt-to-GDP ratio surged by 39.3 proportion factors post-2008 GFC, reaching 71.7 per cent of GDP in 2023.
Elevated international rates of interest have additional sophisticated the panorama, amplifying debt-servicing challenges, notably given the numerous borrowing from non-traditional collectors, together with personal sector entities and rising bilateral companions.
Regardless of these challenges, Nigeria tapped the worldwide capital markets by way of Eurobond issuances. In December 2024, it issued a $2.2bn Eurobond.
The report means that as central banks proceed to decrease charges, additional issuances are anticipated, easing rapid fiscal issues despite the fact that macroeconomic stability stays fragile, with dangers akin to forex depreciation and low overseas reserves.
The continental financial institution went on to make suggestions for Nigeria and different African nations on learn how to climate the storm.
It said, “Africa is navigating a posh debt setting, however the tide could be turned by way of focused, actionable insurance policies. Policymakers should prioritise sturdy fiscal measures, interact strategically with debt aid initiatives, promote long-term progress, and advocate reforms to the worldwide monetary structure. Beneath, we define particular, stakeholder-tailored suggestions, ranked by urgency and affect, and supported by profitable examples from nations like Rwanda, Ethiopia, and Kenya.
“Strengthen value-added tax and leverage digital tax assortment mechanisms to extend tax income. Reassess and redirect public expenditures in the direction of high-impact sectors, together with healthcare, training, and infrastructure improvement.
“The adoption of performance-based budgeting will probably be essential to make sure that assets are allotted effectively and yield measurable outcomes and set up well-resourced DMOs tasked with constantly monitoring debt sustainability and enhancing danger evaluation capabilities.”
Afreximbank concluded that African debt reveals indicators of stabilisation within the medium time period, pushed by macroeconomic tailwinds, diminished rates of interest, and improved entry to capital markets. Whereas challenges stay, the area shows constructive fiscal sustainability indicators because it navigates the post-crisis restoration panorama.
