Nigeria should invest in agriculture and manufacturing to lower its debt burden, according to the African Export-Import Bank (Afreximbank).  ,
This is because it listed the nation as having a total external debt of 69 percent, along with nine other African nations, in the list.
With 8% of Africa’s total external debt, the report, entitled African Debt Outlook: A Ray of Optimism, placed the nation among the top three most indebted nations.
South Africa, which accounts for 14% of the country’s total external debt, was named as the country’s highest debtor, followed by Egypt, which accounts for 13%.
Morocco and Mozambique each account for 6%, while Angola accounts for 5%. Ghana and Ghana share 4%, while Senegal and Côte d’Ivoire share 3%.
The report attributes the need for infrastructure financing, volatile foreign exchange rates, and underdeveloped financial markets to external borrowing.
Ten African countries accounted for 69 percent of the continent’s total external debt in the first half of 2024, up from 67 percent in 2023. South Africa (14%), Egypt (13%), Nigeria (86%), Morocco (66%), Mozambique (66%), Angola (5%)), Kenya (4%), Ghana (4%), Côte d’Ivoire (4%), and Senegal (3%) are the top performers in this category.
In order to manage debt obligations, Nigeria issued a $2.2 billion Eurobond in December 2024, keeping it a significant player in global capital markets.
As multilateral organizations like the World Bank and IMF reduce lending, private creditors are playing a more significant role in Africa’s debt structure.
Many African governments, including Nigeria, are using Eurobonds to finance fiscal shortfalls as a result of private creditors’ offering higher-yield instruments. This method offers immediate capital, but it also has drawbacks because commercial loans typically have longer maturities and higher interest rates than concessional loans.
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The report listed Morocco and South Africa as having a “moderate” debt risk.
However, it warns about rising costs for external borrowing as a result of the tighter global financial environment.
In 2024, Africa’s average borrowing cost increased to 8.2%, which is significantly higher than the steady 5.4% to 6.3% range observed between 2008 and 2019.
“Resource-dependent nations should give economic diversification a higher priority in order to reduce their vulnerability to commodity price shocks. For instance, Angola should develop its renewable energy sector while Nigeria should invest in agriculture and manufacturing.
Countries should avoid excessive reliance on commercial debt by adopting sustainable borrowing practices. In order to improve accountability and transparency, they should also strengthen debt management institutions.
“Macroeconomic tailwinds, lower interest rates, and improved access to capital markets have slowed the growth of African debt over the medium term. As it navigates the post-crisis recovery landscape, the region exhibits positive fiscal sustainability indicators despite the challenges that still exist.
Source: Channels TV
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