A recent report from the African Export-Import Bank (Afreximbank), titled ‘State of Debt Play in Africa and the Caribbean,’ highlights a significant concentration of Africa's external debt. It reveals that a substantial one-third of the continent's foreign debt is held by just three nations: South Africa, which accounts for 13.1%, Egypt at 12%, and Nigeria at 8.4%. Other notable borrowers contributing to this concentration include Morocco (5.9%), Mozambique (5.4%), Sudan (5.2%), and Kenya (4.1%). The report warns that this high concentration of debt in a few large economies, coupled with over 30% distributed among smaller "other" economies, amplifies systemic risks across the continent, potentially triggering wider regional repercussions if any of these countries experience fiscal distress.
The Afreximbank report acknowledges a cautious stabilization in Africa's debt landscape after the fiscal shocks of the COVID-19 pandemic and global monetary tightening. However, it underscores persistent systemic vulnerabilities, noting a growing share of debt held by private creditors (exceeding 40% in some economies), which increases exposure to market fluctuations and refinancing pressures.
Nigeria, for instance, is grappling with a substantial debt burden, reaching N144.6 trillion by December, with external debt making up N62.917 trillion. The nation's debt service costs surged by 68% in 2024 to N13.12 trillion, a significant increase attributed in part to the naira's depreciation against the dollar. This heavy debt servicing constrains Nigeria's ability to invest in crucial social services and infrastructure.
The report emphasizes that Africa's journey towards debt sustainability hinges on implementing structural reforms. These reforms aim to expand fiscal space, reduce reliance on external sources, and boost domestic resource mobilization, advocating for a shift from commodity-led growth to diversified, productivity-driven economies. While Africa's debt outlook for 2024 and 2025 shows a modest deterioration with upward revisions in expected debt-to-GDP ratios, reflecting near-term fiscal pressures, the medium-term outlook (2026-2029) offers cautious optimism.
Forecasts suggest a decline in debt ratios in these later years, driven by anticipated improvements in public financial management, enhanced debt transparency, revenue-boosting measures, and the resumption of growth-supportive fiscal and monetary frameworks. However, the report cautions that these positive projections are critically dependent on effective policy execution, consistent governance, and stable external financing conditions.
