Nigeria has been ranked as the third-highest external debtor in Africa, according to a recent report by the African Export-Import Bank (Afreximbank). The report highlights the growing concerns over rising external debt levels across the continent, with Nigeria’s debt burden continuing to increase amid economic challenges.
Afreximbank’s Debt Report
Afreximbank’s latest findings show that Nigeria holds a significant portion of Africa’s external debt, trailing behind only two other nations. The country’s borrowing has been driven by a combination of factors, including infrastructure development, budget deficits, and the need for economic recovery following global financial disruptions.
Breakdown of Nigeria’s External Debt
Nigeria’s external debt is primarily sourced from:
Multilateral financial institutions like the World Bank and the International Monetary Fund (IMF).
Bilateral agreements with countries such as China, France, and Japan.
Eurobonds and other international financial instruments.
The country’s increasing debt has raised concerns among economists, who warn that continued borrowing without sufficient revenue generation could strain the nation’s economy in the long run.
Africa’s Top External Debtors
According to Afreximbank, the top 10 African countries with the highest external debt include:
Egypt – Leading the list with the largest external debt stock.
South Africa – Ranked second due to high public and private sector borrowing.
Nigeria – Holding the third spot with significant external obligations.
Angola
Kenya
Ethiopia
Ghana
Sudan
Tanzania
Zambia
These nations have relied heavily on external financing for economic growth, infrastructure projects, and fiscal stabilization.
Economic Implications of Nigeria’s Debt
The rising debt profile presents both opportunities and risks for Nigeria’s economy. While borrowing can support economic expansion and development projects, excessive debt servicing costs could reduce government spending on essential sectors like education, healthcare, and social welfare.
Experts have called for improved revenue generation strategies, including tax reforms, diversification of the economy, and increased investment in local industries, to reduce reliance on external borrowing.
The Way Forward
To manage its debt effectively, Nigeria must focus on:
Enhancing domestic revenue collection through better tax administration.
Encouraging foreign direct investment (FDI) to boost economic growth.
Prioritizing sustainable borrowing to ensure loans are used for productive projects.
Reducing dependency on oil revenue by diversifying into sectors like agriculture, technology, and manufacturing.
Nigeria’s ranking as Africa’s third-largest external debtor is a wake-up call for policymakers to adopt more sustainable financial strategies. While borrowing can fuel economic development, excessive debt accumulation without a clear repayment plan could lead to long-term financial instability. Effective debt management and economic diversification remain key to securing Nigeria’s financial future.
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Written By Fortune Davidson