By Emmanuel Nduka
Nigeria and Ghana are among African countries where the cost of servicing external debt is rivaling or exceeding government spending on public health, underscoring the growing pressure debt obligations are placing on already constrained public finances.
The African Development Bank (AfDB) disclosed this in its Regional Economic Outlook 2026 for West Africa, warning that rising debt-servicing costs are increasingly crowding out spending on healthcare, infrastructure and other development priorities.
The report said 25 of 51 African countries with available data spent more on external-debt interest payments than on healthcare between 2021 and 2023, highlighting the widening fiscal trade-off facing governments across the continent.
According to the AfDB, Nigeria and Ghana are among the West African economies where external debt-interest payments rival or exceed public health expenditure as a share of gross domestic product.
The development reflects a broader increase in the proportion of government resources being committed to servicing external obligations. Across Africa, the share of government revenue devoted to external debt service rose from 23.7 per cent in 2017 to 31 per cent in 2024.
The AfDB warned that the growing burden is reducing the fiscal space available to governments to finance essential public services and development programmes.
“Debt service is absorbing a rising share of public resources,” the bank said, adding that the crowding-out effect becomes particularly severe when debt servicing is compared with social spending.
The debt-service burden has become increasingly pronounced in several West African economies, with the AfDB reporting significant increases in external debt service as a share of government revenue.
In Cabo Verde, for instance, the ratio increased from an average of 10 per cent between 2015 and 2019 to 16.7 per cent between 2020 and 2023.
Benin also recorded a sharp increase, with external debt service rising from 7.7 per cent of government revenue during the 2015-2019 period to 16.5 per cent between 2020 and 2023.
The AfDB said external debt service increased as a share of government revenue in most West African economies, raising concerns about the ability of governments to maintain adequate spending on development and social services.
Beyond its immediate impact on public finances, the bank linked high public debt to weaker economic productivity.
It estimated that a one per cent increase in public debt is associated with a 4.9 per cent decline in labour productivity and a 4.6 per cent decline in total factor productivity.
The AfDB attributed the relationship partly to the burden of interest payments, which can reduce government investment in infrastructure, social services and institutions. Heavy government borrowing can also raise financing costs for businesses and other private-sector borrowers.
Nigeria’s Debt Burden
Nigeria continues to face significant debt-servicing obligations despite a decline in its external debt-service payments in the first quarter of 2026.
The country spent $954.06 million servicing its external debt obligations in Q1 2026, representing a 31.5 per cent decline from the $1.39 billion recorded during the corresponding period of 2025.
However, the decline in external debt servicing was accompanied by a significant increase in the cost of servicing domestic obligations.
Nigeria spent N3.14 trillion on domestic debt servicing in Q1 2026, up 20.3 per cent from the N2.61 trillion recorded in Q1 2025.
The figures highlight the growing share of government resources being absorbed by debt obligations at a time when Nigeria faces substantial demands for investment in healthcare, infrastructure, education, security and other critical sectors.
AfDB Wants Stronger Fiscal Management
The AfDB said the rising debt-service burden makes stronger domestic revenue mobilization and more effective liability management increasingly important for African economies.
The bank also stressed the need for governments to ensure that borrowed funds translate into productive investments capable of supporting economic growth and strengthening their capacity to repay debt.
For Nigeria and other heavily indebted African economies, the challenge is therefore not only how much governments borrow, but also how efficiently borrowed resources are deployed and whether they generate sufficient economic returns to justify the additional debt burden.
The AfDB warned that without stronger revenue mobilisation, improved public-investment efficiency and prudent liability management, rising debt-service costs could continue to constrain the fiscal space needed to finance Africa’s development priorities.
