Nigeria and other African nations will require approximately $74 billion for debt servicing in 2024, as limited access to affordable liquidity persists.
This was revealed by the Vice President and Chief Economist for Economic Governance and Knowledge Management at the African Development Bank, Prof. Kevin Urama.
He made this observation during the launch of the Debt Management Forum for Africa and the inaugural policy dialogue titled “Making Debt Work for Africa: Policies, Practices, and Options,” held in Abuja on Monday.
“The continent needs over $74bn in 2024 for debt service only. The figure could be much higher when hidden debt and contingent liabilities are considered,” Urama stated, adding that liquidity demands for debt refinancing remain significant, averaging $10 billion annually from 2025 to 2033.
He also highlighted a surge in African Eurobond yields, which doubled from 2019 levels to reach 15% in 2023, further complicating refinancing efforts.
Urama attributed the 170% rise in Africa’s public debt since 2010 to structural flaws in the global debt system, domestic and international economic shocks, and weak macroeconomic fundamentals on the continent.
He warned that many middle-income African nations risk being trapped in their current income status for decades, with projections indicating it could take an average of 108 years for African countries to transition to high-income levels.
The World Bank’s October 2024 Africa Pulse report projected modest economic recovery for Sub-Saharan Africa, forecasting 3% growth in 2024, up from 2.4% in 2023.
Addressing this, Urama emphasized the importance of DeMFA’s operationalization to combat these challenges, enhance resilience, and accelerate development.
He noted a significant shift in Africa’s debt structure, revealing that privately owned debt rose to 49% by the end of 2023 and is projected to reach 54% in 2024.
“African countries are paying 500% more in interest costs when borrowing from international capital markets than from multilateral development banks,” Urama remarked, underlining the implications of financing long-term development projects with short-term, high-cost loans on debt sustainability.
Despite a projected decline in Africa’s average public debt-to-GDP ratio—from 63.5% (2021–2023) to an estimated 60% in 2024—the continent continues to grapple with surging debt servicing costs.
These costs, which rose from 8.4% of GDP (2015–2019) to 12.7% (2020–2022), divert resources from infrastructure investments critical for GDP growth.
Nigeria, for instance, saw its debt rise by 10.38% quarter-on-quarter to N134.30tn ($91.35bn) in Q2 2024, driven by a 47.6% depreciation of the naira by June. Urama also criticized the unequal allocation of emergency financing, citing Africa’s meager 5.1% share of the $650 billion Special Drawing Rights (SDRs) issued by the IMF in 2021.
He further revealed that Africa loses an estimated $1.6 billion daily in capital outflows, amounting to $587 billion annually—more than three times the continent’s total external financial inflows.
Plugging these leakages is critical, Urama argued, to address Africa’s resource mobilization and debt sustainability challenges.
“These create a vicious cycle of high cost of capital, lack of access to long-term development finance, low investments, poverty, and debt vulnerability,” he explained, stressing the need for Africa to strengthen its fiscal buffers and adopt reforms to counter global debt market dynamics.
Speaking at the event, the Minister of Finance, Mr. Wale Edun, represented by the Director-General of the Debt Management Office, Dr. Patience Oniha, underscored the significance of DeMFA in addressing Africa’s growing debt burden and constrained fiscal space.
He emphasized the forum’s potential to provide innovative tools for public debt management, calling for solutions that avoid cycles of debt distress.
The AfDB also launched the African Debt Managers Initiative Network in June, a program designed to offer home-grown solutions to the continent’s debt challenges.
AfDB Director Coulibaly Abdoulaye noted the network aims to bolster the capacity of African countries in resolving debt issues, restoring stability, and fostering inclusive growth.
AfDB’s Dr. Anthony Simpasa pointed to climate shocks as a key factor behind rising African debt, with countries borrowing heavily to finance climate adaptation projects.
Similarly, Ms. Allison Holland from the IMF’s Strategy, Policy, and Review Department highlighted the complexities of balancing private and public sector debt resolution.
Urama concluded by advocating for lessons from past debt crises, urging African nations to address capital misallocation during economic shocks to foster sustainable growth.
