The African Export-Import Bank (Afreximbank) has advised Nigeria to reduce its debt burden by investing in Agriculture and Manufacturing.
This is as it listed the country alongside nine other African countries, as being responsible for 69 per cent of the continent’s total external debt stock.
The report, African Debt Outlook: A Ray of Optimism, placed the country among the top three most indebted countries, with 8 per cent of Africa’s total external debt.
South Africa was identified 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 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.
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The report classified 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.
“Resource-dependent countries should prioritize economic diversification to reduce vulnerability to commodity price shocks. For example, Nigeria should invest in agriculture and manufacturing, while Angola should develop its renewable energy sector.
“Countries should adopt sustainable borrowing practices, avoiding excessive reliance on commercial debt. They should also strengthen debt management institutions to improve transparency and accountability.
“African debt exhibits signs of stabilization 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.
“To sustain this momentum, African economies must systematically reduce fiscal deficits, prioritize efficient public expenditures, enhance tax revenue collection, and bolster transparency in debt management practices,” the bank advised.
