- 21 countries at risk of or in debt distress
- Africa faces $21bn liquidity shortfall
- Requires $7.5bn annually to refinance debt
Africa is spending billions of dollars every year to borrow money it urgently needs for development, with debt servicing consuming about $90 billion annually and risk premiums adding another $75 billion to the continent’s financing costs.
The $165 billion burden comes as African countries require an estimated $1.3 trillion each year to meet their development objectives, leaving governments with a difficult trade-off between meeting debt obligations and funding infrastructure, health, education and climate programmes.
The scale of the financing burden is forcing policymakers to look beyond Africa’s debt stock and focus increasingly on the cost of capital itself. At the centre of the debate is whether African economies can mobilise enough affordable financing to close their development gap when investors continue to demand substantial premiums for lending to the continent.
For policymakers gathered in Nairobi, Kenya, the problem is no longer simply how much Africa owes. It is increasingly about the price the continent pays for access to capital and whether African countries can continue financing development under borrowing conditions they consider disproportionately expensive.
“Africa pays $90 billion a year in debt service. That is more than aid and climate finance combined,” Korir Sing’oei, Kenya’s principal secretary for foreign affairs, said at the closing ceremony of the sixth African Conference on Debt and Development (AfCoDD VI).
The conference was organised by the African Forum and Network on Debt and Development (AFRODAD).
Sing’oei said African borrowers also pay an estimated $75 billion annually in additional interest because of the risk premiums attached to the continent’s debt, describing the cost as a “trust tax”.
“This Africa risk premium forces an unpleasant choice between servicing expensive debt and investing in the health, education and climate resilience of our people,” he said.
The figures capture a growing concern among African policymakers that the continent’s development ambitions are being constrained not only by limited access to capital but by the high cost of the financing it can obtain.
Nigeria illustrates the cost of debt shocks
Nigeria offers a clear example of how quickly the cost of public borrowing can escalate when currencies weaken and interest rates rise.
The federal government said it incurred N10.61 trillion in additional debt-service costs between June 2023 and December 2025.
The amount was N4.14 trillion higher than the N6.47 trillion spent on strategic infrastructure during the same period, according to a scorecard released by the Ministry of Finance.
The bulk of the additional cost, N9.37 trillion, was linked to the depreciation of the naira and its impact on servicing external debt. Higher interest rates added another N1.24 trillion to domestic debt-service costs.
Together, the additional debt-service burden represented about 34.6 percent of the government’s N30.64 trillion incremental expenditure during the period, compared with 21.1 percent allocated to strategic infrastructure.
The wider concern for African economies is the volatility of the debt-service burden. Borrowing costs can rise well after financing has been secured, as currency depreciation, tighter global interest rates and changing investor risk appetite increase the amount governments must ultimately repay.
The Nigerian government attributed the increase in external debt-service costs largely to the depreciation of the naira following foreign exchange reforms, while higher monetary policy rates increased the cost of domestic borrowing.
Nigeria’s total public debt stood at N159.35 trillion as of March 31, 2026, comprising $51.90 billion in external debt and N63.05 trillion in domestic debt, according to the Debt Management Office.
The country’s experience underscores the growing importance of debt pricing and currency risk in determining whether government borrowing remains sustainable.
Cost of capital becomes a foreign-policy issue
Sing’oei argued that the cost of capital should no longer be treated as a technical matter left mainly to finance ministries, debt management offices and central banks.
Instead, he said, it has become one of Africa’s most important foreign-policy challenges.
“In the 1960s, foreign policy on the continent was about political independence and political sovereignty.
“In the 1990s, when state capacity was hollowed out through structural adjustment programmes, it shifted to aid, when Africa was knocking on doors for more aid.
“Today, I submit, the central theme of foreign policy for Africa is the cost of capital,” he stated.
Africa’s financing requirements, he argued, have become too large for foreign-policy institutions to remain outside discussions involving debt, bonds, equities and other financial instruments.
But he said a gap persists between financial and diplomatic expertise.
Many foreign-policy officials lack sufficient understanding of complex financial instruments, while officials responsible for finance may not always fully understand the geopolitical and historical forces shaping international lending, he said.
The divide weakens African countries’ negotiating positions and contributes to financing arrangements that leave governments paying more for capital.
Private creditors complicate debt negotiations
Africa’s debt challenge has also become more complex because the composition of its creditors has changed significantly.
About 70 percent of Africa’s debt was owed to Paris Club creditors in the 1990s, according to Sing’oei.
Today, around 40 percent is held by private bondholders across financial centres including London, Hong Kong and the Gulf states.
The changing creditor structure has fragmented debt negotiations and made restructuring more difficult.
Sing’oei cited Zambia, where the restructuring of the country’s debt took four years amid disagreements involving China and Paris Club creditors.
Kenya’s own Eurobond negotiations, he said, involved investors and market participants in Paris, London, New York and other financial centres.
“This is not just a loss of finance; it is also a loss of sovereignty,” he said.
Some financing arrangements involve explicit conditions, including collateral and mineral offtake agreements, while other forms of pressure are less direct.
Countries facing repayment difficulties can suffer credit-rating downgrades that restrict their access to new financing and further increase borrowing costs.
The result can become a self-reinforcing cycle in which high perceived risk leads to more expensive borrowing, while higher borrowing costs increase the likelihood of financial distress.
$90bn debt bill confronts development needs
The financing pressure is growing as Africa confronts large development and refinancing requirements.
Paul Sikazwe, technical adviser on debt at the African Union Commission, said about 21 African countries were either at high risk of debt distress or already in debt distress.
The continent faces an immediate liquidity shortfall of about $21 billion and will require approximately $7.5 billion annually over the next decade to refinance maturing debt, he said.
At the same time, the African Union estimates that the continent requires about $1.3 trillion in additional financing annually to achieve the Sustainable Development Goals by 2030.
The numbers underline the difficult choices confronting governments. Resources used to service expensive debt cannot simultaneously be invested in roads, power, healthcare, education, climate adaptation and industrial development.
For African policymakers, reducing the cost of capital is therefore becoming as important as increasing the volume of development financing.
Climate ambitions collide with expensive capital
The high cost of borrowing is also complicating Africa’s transition to cleaner energy and industrial development.
Sing’oei said Africa has about 60 percent of the world’s best solar resources but receives only around one percent of global green finance.
“We cannot build green industrialisation when we are borrowing at 12 percent in dollars.
“We are borrowing expensive money to solve a climate crisis we did not cause,” he said.
The disparity has strengthened calls for debt and the cost of capital to become central issues in Africa’s climate diplomacy.
African countries are attempting to finance infrastructure, energy transition and industrialisation with commercial capital that can be significantly more expensive than financing available to richer economies.
The question increasingly facing policymakers is whether the continent can meet its development and climate objectives without fundamental changes to the way African risk is priced in international capital markets.
Africa seeks collective bargaining power
African governments are now pursuing a more coordinated response.
One of the central proposals is the African Common Position on Debt, adopted earlier this year in Lomé, Togo.
The framework is intended to strengthen Africa’s bargaining position by encouraging countries to engage creditors collectively rather than negotiate separately.
“It means not 54 solo negotiators on the part of each African country, but a collectivised negotiation,” Sing’oei said.
He also backed the proposed Debtors Club, a coalition of debtor nations intended to strengthen developing countries’ negotiating position within the global financial system.
The approach reflects the belief that individual African countries often face an imbalance of technical expertise and negotiating power when dealing with large international creditors.
Sing’oei said governments would also need to work closely with civil society organisations capable of providing research, data and technical expertise.
Push for an African credit-rating agency
Another element of the proposed response is the creation of an African Credit Rating Agency.
Sing’oei said the agency was expected to be launched in Mauritius in October and would give African countries greater capacity to assess their own risks and challenge the premiums attached to their borrowing.
The objective is not to stop African governments from borrowing, he said.
He added that Africa needs both debt and equity to finance development, but financing should be obtained on reasonable terms and, where possible, through concessional arrangements.
Stefano Prato of the Society for International Development also criticised the influence of international credit-rating agencies on African borrowing costs and supported the proposed African agency.
He cautioned, however, that creating an African rating institution would not automatically guarantee more favourable or fairer assessments.
Debt transparency remains a weak link
The campaign to reduce borrowing costs is also drawing attention to weaknesses in debt disclosure and domestic oversight.
Douglas Bitonda Kigabo, an economic affairs officer with the United Nations Economic Commission for Africa, said governments should publish information covering not only central government debt but also borrowing by sub-national governments and state-owned enterprises.
Government guarantees and other liabilities that could eventually become public obligations should also be disclosed, he said.
Kigabo warned that weak laws and regulations, fragmented institutions and inadequate oversight by parliaments and civil society were making it harder to properly manage Africa’s debt.
The World Bank reported in 2025 that more than 75 percent of low-income countries publish some debt information, but only about a quarter disclose loan-level details on newly contracted debt.
Incomplete disclosure can make it difficult to establish the full extent of a country’s obligations and assess the risks facing public finances.
The transparency challenge extends beyond conventional sovereign borrowing. Debt accumulated by state-owned enterprises, sub-national governments and obligations arising from government guarantees can eventually migrate onto national balance sheets.
Lawmakers push for stronger oversight
Participants at the conference said transparency would have limited value without stronger scrutiny of government borrowing.
Masenate Molapo, programme manager for Trade, Industry, Finance and Investment at the SADC Parliamentary Forum, said lawmakers must play a more active role in examining debt.
“There has to be accountability. There has to be statistics. There has to be questions asked. Where is the money going? How is the money going to be used?” she said.
The SADC Parliamentary Forum stated that it is working with civil society organisations on a model law on public financial management aimed at strengthening parliamentary oversight of government borrowing and spending.
Grieve Chelwa, a professor and chair of the Department of Social Sciences, said many legislators lacked the technical expertise required to scrutinise complex loan agreements.
He said governments sometimes presented borrowing proposals after projects had already been incorporated into national budgets, making it difficult for lawmakers to challenge them.
“We need to increase capacity amongst legislators on assessing what a good deal looks like from a bad deal,” Chelwa said.
Citizens should also have a greater voice in borrowing decisions because they ultimately bear the costs, he added.
While African governments are demanding reforms to the international financial system, participants also warned against treating external factors as the sole cause of the continent’s debt difficulties.
Horman Chitonge, a professor at the Centre for African Studies at the University of Cape Town, said Africa’s debt problems were closely linked to the structure of its economies.
African countries continue to pay more for borrowing while remaining heavily dependent on raw-material exports.
“Africa has to learn to make things on this continent,” Chitonge said, calling for greater investment in transport, energy and digital infrastructure to support production and trade,” he said.
Aissata Bah Mwansa of Zambia’s Ministry of Finance and National Planning similarly cautioned against blaming the international financial system for all of Africa’s debt problems.
“We cannot argue for a fairer international system while neglecting our own reforms within our own economies and countries,” she said.
She cited low domestic savings, limited productive capacity, economic concentration and governance weaknesses among the challenges African governments must address.
Dube Lang Salishango of Botswana said recurring debt problems would persist unless African economies changed the structures that leave them dependent on external borrowing.
“If the structure does not change, that problem will not go away,” he said.
A $20bn prize for cheaper borrowing
Africa is seeking to reduce its borrowing premium by about 200 basis points over the next three to four years.
Sing’oei estimated that such a reduction could save African countries about $20 billion annually.
“That $20 billion is enough to fund the African Union’s Agenda 2063 infrastructure agenda,” he said.
The prospect of substantial savings is pushing the cost of capital to the forefront of Africa’s economic and diplomatic discussions.
Lower borrowing costs would give governments greater fiscal space to invest in infrastructure, public services and climate resilience without necessarily expanding their debt burdens.
As a result, the conversation around African debt is evolving. Policymakers increasingly accept that external financing remains necessary for development; the challenge is securing debt and long-term investment on terms that do not undermine economic progress.
The central concern is whether Africa can continue to justify paying a substantial risk premium that its leaders argue is influenced by perceptions that do not always reflect underlying economic conditions.
With annual debt-service costs at about $90 billion and an estimated $75 billion additional burden linked to risk premiums, the cost of capital has become a direct constraint on Africa’s development ambitions.
The next test will be whether calls for collective bargaining, stronger debt institutions, greater transparency and domestic reforms can translate into a measurable reduction in the price African countries pay to finance their future.
