Nigeria and other African nations will need approximately $74 billion for debt servicing in 2024, amidst challenges like limited access to affordable liquidity, according to Professor Kevin Urama, Vice President and Chief Economist at the African Development Bank (AfDB). He made this statement during the launch of the Debt Management Forum for Africa and the Inaugural Policy Dialogue in Abuja.
Urama further explained that the total debt servicing figure could be much higher if hidden debts and contingent liabilities were accounted for. Africa’s annual liquidity needs for debt refinancing are expected to average $10 billion from 2025 to 2033, compounded by a rise in African Eurobond yields, which doubled from 7.5% in 2019 to 15% in 2023.
The AfDB economist attributed the surge in Africa’s public debt, which has increased by 170% since 2010, to a mix of global debt architecture issues, shocks, and weaknesses in the continent’s macroeconomic policies. He also noted that many middle-income African countries could remain trapped in their current economic status for decades, taking an average of 108 years to transition to high-income levels.
Urama emphasized the need for reforms and strategies to address debt sustainability, including better management of private-sector debt, which now comprises nearly half of Africa’s public debt. He noted that borrowing from private creditors is five times more expensive than borrowing from multilateral banks, worsening debt sustainability.
Nigeria’s debt has been rising as well, increasing by 10.38% to N134.30 trillion ($91.35 billion) by mid-2024, exacerbated by the naira’s depreciation. The country’s rising debt service costs divert resources from infrastructure, thereby impeding growth.
Addressing the issue of global financing, Urama also pointed out that Africa’s share of emergency financial support, such as the IMF’s Special Drawing Rights (SDRs) and fiscal measures during the pandemic, was disproportionately small.
The finance challenges faced by Africa, Urama concluded, underline the urgent need for innovative solutions in debt management, highlighting the role of the newly launched Debt Management Forum for Africa (DeMFA) in addressing these issues. The forum aims to foster better debt management practices and offer more effective debt solutions for the continent’s growing financial needs.
