Nigeria, alongside nine other African countries, accounts for 69 per cent of the continent’s total external debt stock, according to a new report by the African Export-Import Bank (Afreximbank).
The report, African Debt Outlook: A Ray of Optimism, highlights Nigeria’s significant debt burden, placing it among the top three most indebted countries, with 8 per cent of Africa’s total external debt.
It identifies South Africa as the largest debtor with 14 per cent of Africa’s external debt, followed by Egypt at 13 per cent.
Morocco and Mozambique each account for 6 per cent, while Angola holds 5 per cent. Kenya and Ghana have 4 per cent each, and Côte d’Ivoire and Senegal hold 3 per cent each.
The report attributes the high levels of debt to external borrowing driven by underdeveloped financial markets, volatility in foreign exchange earnings, and the need for infrastructure financing.
It read, “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 countries leading this metric are South Africa (14 percent), 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).”
Nigeria’s debt burden in context
Nigeria’s share of Africa’s external debt highlights its reliance on international borrowing to finance budget deficits and critical infrastructure. The country has consistently accessed Eurobond markets, concessional loans from multilateral institutions, and other external financing options to bridge revenue gaps. Afreximbank estimates Africa’s total external debt stock at $1.16 trillion in 2023, with projections indicating an increase to $1.29 trillion by 2028.
Nigeria remains a key player in international capital markets, issuing a $2.2 billion Eurobond in December 2024 to manage debt obligations.
The report highlights the increasing role of private creditors in Africa’s debt structure as multilateral institutions like the World Bank and IMF scale back lending.
With private creditors offering higher-yield instruments, many African governments, including Nigeria, are turning to Eurobonds to finance fiscal shortfalls. While this approach provides immediate capital, it also carries risks, as commercial borrowing tends to come with higher interest rates and shorter maturities than concessional loans.
The report classifies Nigeria’s debt risk as “moderate” alongside South Africa and Morocco. However, it warns of rising external borrowing costs amid tighter global financial conditions. Africa’s average cost of borrowing surged to 8.2 per cent in 2024, significantly higher than the stable 5.4–6.3 per cent range observed between 2008 and 2019.
With interest payments accounting for an increasing share of government revenue, Nigeria faces additional fiscal pressures.
Afreximbank highlights that in 2024, the ratio of interest payments to government revenue in Africa peaked at 27.5 per cent, up from 6.8–19 per cent in previous years. This mounting debt service obligation continues to strain budgets and limit fiscal flexibility.
A changing debt landscape and optimistic projections
Despite 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 management, economic diversification, and enhanced access to capital markets are expected to help stabilise its debt trajectory.
Favourable macroeconomic conditions, stable interest rates, and improving credit ratings are cited as factors that could ease debt concerns across Africa.
The report notes that countries such as Ethiopia, Sudan, and Zambia have benefited from debt restructuring under the G20 Common Framework and the Paris Club, a model Nigeria could explore if necessary.
Global monetary easing is another factor shaping the outlook for debt. The U.S. Federal Reserve and other major central banks have begun reducing interest rates, a move expected to lower borrowing costs for African economies, including Nigeria.
While Afreximbank presents an optimistic medium-term outlook, it also outlines risks that could undermine debt sustainability. Weak domestic revenue mobilisation remains a major challenge for Nigeria, given its dependence on oil revenues, which exposes the country to external shocks.
The country’s high fiscal deficits necessitate further borrowing, increasing exposure to global interest rate fluctuations. Currency depreciation remains another risk, as a weaker naira raises the cost of servicing external debt.
Afreximbank recommends that countries adopt stronger debt management strategies, including improving tax revenue collection, engaging with debt relief frameworks, and diversifying the economy by investing in manufacturing, agriculture, and renewable energy.
The report also calls for reforms in the global financial system to ensure fairer lending terms and better access to concessional financing for African economies.