Nigeria and Nine Other Nations Hold 69% of Africa’s External Debt…

Nigeria and nine other African nations collectively account for 69% of the continent’s external debt, as reported by Afreximbank. The increased obligation has pressure on countries due to high interest rates and reliance on foreign loans. Nigeria’s public debt reached N142.3 trillion by September 2024, underscoring severe financial challenges, though opportunities for stabilization through strategic fiscal policies exist.

A recent report by Afreximbank Research reveals that Nigeria, along with nine other African nations, accounts for 69% of the continent’s external debt. This figure has increased from 67% in 2023, emphasizing the mounting debt challenges faced by African countries. Nigeria alone represents 8% of this debt, alongside major contributors such as South Africa (14%), Egypt (13%), and Morocco (6%).

The report indicates that Africa’s external debt levels remain high due to underdeveloped domestic financial markets and rising interest rates. The reliance on foreign currency for imports and dependence on aid and concessional loans has intensified the continent’s external indebtedness. Since 2008, Africa’s external debt has escalated to approximately $1.16 trillion, projected to increase to $1.17 trillion in 2024, driven largely by population growth.

As of September 30, 2024, Nigeria’s public debt reached N142.3 trillion, reflecting a 5.97% increase compared to June 2024. Debt servicing costs surpassed N7 trillion in the first three quarters of 2024, mainly due to obligations to international creditors and significant interest on commercial loans. This showcases Nigeria’s financial challenges amidst a complex global economic environment.

The report also highlights critical factors fueling Africa’s indebtedness, including the need for investment in infrastructure, healthcare, and education. It notes a marked rise in the aggregated debt-to-GDP ratio, which surged to 71.7% by 2023, illustrating the ongoing financial pressures faced by the region.

Despite the challenges, Nigeria successfully accessed international capital markets with a $2.2 billion Eurobond issuance in December 2024. The report indicates that further issuances could occur as central banks potentially lower interest rates, which may provide some short-term fiscal relief, though macroeconomic stability remains tenuous due to risks like currency depreciation.

To address these dire financial circumstances, Afreximbank recommends that Nigerian policymakers implement targeted strategies, emphasizing robust fiscal measures and engagement in debt relief initiatives. It advises prioritizing high-impact sectors through a reassessment of public expenditures and improving tax revenue collection, particularly through digital means. Enhanced budgeting practices and strengthened debt management offices are also essential for monitoring sustainability.

In conclusion, while Africa’s debt landscape poses significant challenges, signs of stabilization are emerging, facilitated by improving macroeconomic conditions and favorable access to capital markets. Afreximbank emphasizes that with diligent policy implementation and reform, the continent can navigate its post-crisis recovery more effectively.

In summary, Nigeria and nine other countries represent a significant portion of Africa’s external debt, currently amounting to 69% of the total. Despite rising financial pressures and continued economic challenges, strategic financial measures and policies are necessary to enhance fiscal sustainability. Improved public spending, tax generation, and careful debt management are critical components that can lead to recovery and stability in the region.

Original Source: economicconfidential.com