Africa paying more for debts it accumulates; observers worried over future
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Africa paying more for debts it accumulates; observers worried over future

- Recent reports show that African countries are currently paying more for debts accumulated

- It has been established that such countries are paying more for debts between 2018 and 2019 than was paid from 2003 to 2016

- Of all the countries in Africa, only South Africa's bond market is considered to be developed, active and liquid

There is renewed concern about the sustainability of Africa’s debts as fresh evidence shows that African countries are paying more for debts accumulated.

Information available shows that much of the debt is being accumulated through foreign currency-denominated Eurobonds which were issued on international financial markets.

Legit.ng understands that the total value of Eurobonds issued between 2018 and 2019 exceeded the value of all bonds sold between 2003 and 2016.

Africa paying more for debts it accumulates; observers worried over future

President Buhari would have to task his foot soldiers to ensure the Nigerian economy does not suffer due to debts. Photo: Aso Rock
Source: Twitter

A report by qz.com shows that African governments are currently issuing and listing their Eurobonds.

These are available on recognized international debt markets such as the London and the Irish Stock Exchanges.

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African governments, it has been revealed, may not venture offshore if there were active and liquid domestic bond markets.

Apart from the South African market, bond markets in the continent appear to be largely underdeveloped, inactive and illiquid secondary markets.

This, it has been gathered, makes it difficult to attract local participation of international investors.

The International Monetary Fund (IMF) has argued that African countries are issuing Eurobonds, with about half of them at or near levels of distress.

It went on to say that African governments are increasing debts without analyzing the risks associated with the exchange rate as well as the real costs of repaying the debts.

Two key elements are often taken into consideration with the assessment of a country’s debt burden.

One of them has been identified as the level of debt based on the ratio of debt to gross domestic product (GDP), while the other is the cost of servicing the debt-interest payments.

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Apart from Cape Verde, Djibouti, Congo and Mozambique, every African country has a debt-to-GDP ratio averaging 60%; this is the threshold recommended by the IMF’s and African Monetary Co-operation Programme.

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Meanwhile, the federal government has admitted that Nigeria’s economy has “gone down.”

This was stated by the minister of labour and employment, Chris Ngige on Tuesday, February 18 when he hosted the United States of America Ambassador, Mary Beth Leonard.

Ngige also spoke on the economic downturn, saying Nigeria made a mistake depending on a single revenue source for decades.

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