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Nigeria is among the top 10 African countries accounting for 69% of the continent’s total external debt, according to a report by Afreximbank Research titled ‘African Debt Outlook: A Ray of Optimism’. The report highlights the challenges and opportunities facing African nations in managing their debt.
For further information, read more details here
In the first half of 2024, 10 African nations, including Nigeria, constituted 69% of the continent’s total external debt stock, up from 67% in 2023. Nigeria accounts for 8% of this debt, with other leading countries being South Africa (14%), Egypt (13%), Morocco (6%), Mozambique (6%), Angola (5%), Kenya (4%), Ghana (4%), Côte d’Ivoire (3%), and Senegal (3%).
“Africa’s external debt levels remain elevated, primarily due to the limited development of domestic financial markets and high interest rates,” the report states. “The growing demand for foreign exchange to finance imports has further exacerbated external indebtedness, fuelled by reliance on aid, concessional loans from multilateral institutions, and competitive rates offered by private creditors.”
The report notes that since 2008, the external debt of African countries has escalated significantly, reaching approximately $1.16tn and representing 60% of the region’s total public debt stock as of 2023. Projections indicate a slight increase to $1.17tn in 2024, with sustained growth anticipated, potentially reaching $1.29tn by 2028.
Nigeria’s total public debt rose to N142.3tn as of September 30, 2024, representing an increase of 5.97% (N8.02tn) compared to N134.3tn in June 2024. In the first three quarters of 2024, debt servicing was in excess of N7tn on the back of higher obligations to multilateral and bilateral creditors, alongside significant interest payments on commercial loans.
For further information, read more details here
The Afreximbank Research report identifies infrastructure development, healthcare, and education costs in emerging markets as key contributors to Africa’s increasing debt burden. The report notes that the aggregated debt-to-GDP ratio surged by 39.3 percentage points post-2008 GFC, reaching 71.7% of GDP in 2023.
To address these challenges, the report recommends that policymakers prioritize robust fiscal measures, engage strategically with debt relief initiatives, promote long-term growth, and advocate reforms to the global financial architecture.
“Strengthen value-added tax and leverage digital tax collection mechanisms to increase tax revenue,” the report advises. “Reassess and redirect public expenditures towards high-impact sectors, including healthcare, education, and infrastructure development.”
“Africa is navigating a complex debt environment, but the tide can be turned through targeted, actionable policies,” the report states. “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 further recommends that policymakers “adopt performance-based budgeting, which will be critical to ensure that resources are allocated efficiently and yield measurable outcomes.” It also advises policymakers to “establish well-resourced Debt Management Offices (DMOs) tasked with continuously monitoring debt sustainability and enhancing risk assessment capabilities.”
Afreximbank concludes that African debt exhibits signs of stabilisation in the medium term, driven by macroeconomic tailwinds, reduced interest rates, and improved access to capital markets. While challenges remain, the region displays positive fiscal sustainability indicators as it navigates the post-crisis recovery landscape.
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