AFRICA’S DEBT BURDEN continues to grow, with Nigeria among the top contributors to the continent’s external liabilities. Rising borrowing costs, foreign exchange volatility, and dependency on external financing have intensified debt concerns, raising questions about how these liabilities impact ordinary Nigerians.
The Explainer gathered that Nigeria is one of ten African nations responsible for 69 per cent of the continent’s total external debt. This was revealed in Afreximbank’s latest report, African Debt Outlook: A Ray of Optimism, which examines Africa’s debt trajectory, financing trends, and the risks associated with growing external liabilities.
The report notes that Africa’s total external debt reached $1.16 trillion in 2023, representing 60 per cent of the region’s total public debt stock. Projections indicate an increase to $1.17 trillion in 2024, with sustained growth potentially pushing the figure to $1.29 trillion by 2028.
Nigeria, which accounts for 8 per cent of Africa’s external debt, follows South Africa (14 per cent) and Egypt (13 per cent) as one of the most indebted nations on the continent. Other heavily indebted countries include Morocco and Mozambique (6 per cent each), Angola (5 per cent), Kenya and Ghana (4 per cent each), and Côte d’Ivoire and Senegal (3 per cent each).
The Explainer learned that these ten nations collectively accounted for 69 per cent of Africa’s external debt stock in the first half of 2024, up from 67 per cent in 2023.
The Explainer gathered that Nigeria’s rising debt burden translates into higher government spending on debt servicing, leaving fewer resources for essential public services such as healthcare, education, and infrastructure. In 2022, Nigeria allocated 96.3% of its revenue to debt servicing, according to the World Bank’s Macro Poverty Outlook for Nigeria, April 2023. This means that for every ₦100 earned, ₦96.30 was used to pay off existing debts, leaving only ₦3.70 for salaries, infrastructure projects, and other public expenditures.
The Debt Management Office (DMO) reported a debt service-to-revenue ratio of 73.5% for 2023, highlighting concerns about the sustainability of Nigeria’s fiscal policies.
High external debt also affects inflation and the cost of living for Nigerians. With a significant portion of the debt denominated in foreign currency, Nigeria’s naira depreciation against the dollar increases debt servicing costs. In 2023, the Nigerian naira experienced a significant depreciation against the US dollar. According to data from BusinessDay, the naira depreciated by 96.55% year-on-year, with the dollar quoted at ₦907.11 on the last trading day of 2023, compared to ₦461.61 at the end of 2022. This devaluation led to increased costs for imports, subsequently driving up prices for essential goods such as food and fuel. The Explainer gathered that this currency depreciation has had profound effects on the daily lives of Nigerian citizens, affecting their purchasing power and overall economic well-being.
As of March 2025, the naira continues to face challenges in the foreign exchange market. Current forecasts predict the exchange rate to reach approximately 1,498 nairas per US dollar by March 20, 2025. This ongoing depreciation underscores the persistent volatility in Nigeria’s currency valuation.
Inflation has mirrored this currency instability. In December 2024, Nigeria’s inflation rate peaked at 34.8%. However, recent data indicates a decrease to 24.48% in January 2025. This decline suggests potential stabilization, though the rate remains elevated compared to historical standards.
Afreximbank noted that “the growing demand for foreign exchange to finance imports has further exacerbated external indebtedness, fueled by reliance on aid, concessional loans from multilateral institutions, and competitive rates offered by private creditors.”
The Explainer learned that Nigeria, like many other African nations, is increasingly relying on private creditors to finance fiscal shortfalls.
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The Afreximbank report highlights how the role of private lenders has expanded as multilateral institutions such as the World Bank and the International Monetary Fund (IMF) reduce lending exposure.
Nigeria issued a $2.2 billion Eurobond in December 2024 to manage its debt obligations, further increasing its reliance on external borrowing. While Eurobonds provide immediate capital, they also carry risks, as commercial borrowing tends to come with higher interest rates and shorter repayment periods than concessional loans.
Africa’s average cost of borrowing surged to 8.2 per cent in 2024, a sharp increase from the 5.4–6.3 per cent range observed between 2008 and 2019. With higher interest rates, the burden of external liabilities becomes more severe, forcing the government to increase taxes, remove subsidies, or cut public spending—measures that directly affect citizens’ daily lives.
Afreximbank’s findings indicate that most of Africa’s external debt is long-term, accounting for 75 per cent, while short-term debt makes up 15.9 per cent. The Explainer gathered that Nigeria’s long-term borrowing is primarily aimed at funding infrastructure projects and economic development. However, despite these investments, public infrastructure remains inadequate, with poor road networks, unreliable electricity, and an overstretched healthcare system.
The report projects that from 2024 to 2028, long-term debt will remain the dominant form of borrowing, increasing from 75.7 per cent in 2024 to 76.4 per cent in 2028. While this reduces short-term repayment pressures, it also means Nigeria will remain indebted for decades, with future generations bearing the financial burden.
To address its growing external debt, Afreximbank recommends that Nigeria prioritise economic diversification. “Resource-dependent countries should prioritise economic diversification to reduce vulnerability to commodity price shocks,” the bank stated. “For example, Nigeria should invest in agriculture and manufacturing, while Angola should develop its renewable energy sector.”
The Explainer gathered that over 90 per cent of Nigeria’s foreign exchange earnings come from crude oil exports, making the economy highly susceptible to oil price fluctuations. A sharp decline in oil prices, as seen in 2020, can lead to revenue shortfalls, forcing the government to borrow more.
Afreximbank also urged African governments to establish robust social safety nets to protect vulnerable populations from economic shocks. The bank cited Kenya’s cash transfer programmes during the COVID-19 pandemic as an example of how targeted policies can help mitigate the impact of inflation and rising food prices.
The Explainer gathered that while Africa’s external debt remains high, fiscal sustainability indicators suggest that some governments are successfully managing post-crisis recovery. Afreximbank recommends that African economies systematically reduce fiscal deficits, prioritise efficient public expenditures, enhance tax revenue collection, and bolster transparency in debt management.
For Nigeria, the key to reducing external liabilities lies in sustainable borrowing and prudent financial management. Afreximbank advised that “countries should adopt sustainable borrowing practices, avoiding excessive reliance on commercial debt. They should also strengthen debt management institutions to improve transparency and accountability.”
