The African Export Bank (AFREXIMBANK) has identified Nigeria as one of the 10 African countries, accounting for 69% of the continent’s total foreign debt.
In its latest report Africa’s debt prospects: optimismAfreximbank said that due to underdeveloped domestic financial markets and rising interest rates, the level of foreign debt in Africa remains high.
“In the first half of 2024, ten African countries accounted for 69% of the continent’s total debt stocks, up from 67% in 2023,” the report reads.
According to the report, South Africa leads with 14% of Africa’s total debt, followed by Egypt (13%), Nigeria (8%), Morocco (6%), Mozambique (6%), Angola, Angola (5%), Kenya (4%), Ghana (4%), côted’Ivoire (3%) and 3% and 3% and 3% and 3%.
The bank attributed the rise in debt to an increase in demand for foreign exchange to fund imports, relying on aid and preferential loans from multilateral institutions and competitive interest rates provided by private creditors.
“Since 2008, the foreign debt of African countries has escalated significantly, reaching about $11.6 trillion, accounting for 60% of the region’s total public debt stocks as of 2023,” Afreximbank said.
“Forecasts show that the slight increase to $11.7 trillion in 2024 is expected to continue to grow, and could reach $1.29 trillion by 2028. This trend is driven by rising financing demand on the continent, largely due to pressures on population growth.”
Afreximbank noted that long-term debt still dominated, accounting for 75% of Africa’s total debt, while short-term debt was 15.9%.
“There is an increasing demand for financing in the mainland, especially infrastructure development, which requires long-term debt. Between 2008 and 2023, long-term debt has increased compared to short-term debt.”
AFREXIMBANK provides recommendations to curb foreign debt and urges resource-dependent countries to prioritize economic diversity.
The bank advises: “Nigeria should invest in agriculture and manufacturing, for example, while Angola should develop its renewable energy sector.”
The report also calls for sustainable lending practices, improved debt management agencies and a stronger social security network to protect vulnerable people during the economic shock.
Although the challenges remain, Afreximbank noted that the debt situation in Africa shows signs of stability due to improvements in the macroeconomic, lower interest rates and better access to capital markets. The bank recommends that the government reduce fiscal deficits, improve public spending efficiency, increase tax revenues and promote transparency in debt management.
