Breaking Africa’s Debt Cycle
We are entering a new era marked by profound geopolitical shifts, dwindling development aid, rising trade barriers, and escalating global conflicts. Amidst these challenges, a unique opportunity emerges to forge innovative global partnerships based on mutually beneficial investments and shared values.
Africa must be at the heart of this effort. It is home to some of the world’s fastest-growing economies and is rich in vast renewable energy resources, including wind, solar, geothermal, and hydropower. Additionally, it possesses over one-fifth of the world’s critical minerals essential for the transition to a green economy. However, realizing Africa’s developmental potential requires a fair competitive environment, which includes addressing the rapidly escalating debt crisis that threatens to undermine decades of hard-won development gains.
The scale of the crisis is staggering. In 2023 alone, low- and middle-income countries spent $1.4 trillion servicing their external debts, with African nations among the highest in interest and penalties paid. As a result, these countries have been forced to divert vital resources away from priorities like education, healthcare, and climate change adaptation to service costly loans.
Today, more than half of African countries spend more on debt service than on healthcare. In Malawi, debt servicing expenses exceed the country’s education budget, effectively condemning an increasing number of youth to a future of ignorance, unemployment, and poverty.
While African governments are called upon to manage finances responsibly and uphold transparent accountability, the debt dilemma is not solely due to mismanagement or unwise borrowing; it is also rooted in structural imbalances within the global financial system. Sovereign borrowers in Africa face exorbitantly high interest rates in international capital markets, sometimes surpassing what countries with similar or worse credit histories pay. This "African premium" persists despite the continent’s relatively low default rates.
Moreover, African nations lack the option to refrain from borrowing; they stand on the front lines of a climate crisis they did not cause. Countries like Kenya, Malawi, and Mozambique have been compelled to take on massive debts to recover from increasingly frequent and severe natural disasters. Meanwhile, small island developing states like Mauritius borrow merely to survive against rising sea levels. The COVID-19 pandemic, global inflation, and soaring food and energy prices have further deepened this vulnerability.
Recently, the United States announced sharp tariffs on imports from African countries with trade surpluses with it—nations that depend on exports to pay off their debts. Although the enforcement has been postponed for 90 days, negative repercussions are already surfacing in the fragile economies of the continent. Compounding this is the announcement of cuts to U.S. foreign aid programs, threatening to weaken essential services, slow economic recovery, and increase political and social unrest, with Africa’s most vulnerable communities bearing the brunt.
In a deeply interconnected global economy, the consequences of these policies will not remain confined to Africa. They will disrupt supply chains, destabilize economies, and hinder the transition to clean energy, harming consumers and businesses worldwide, diminishing investment opportunities, and stunting potential economic growth.
Therefore, any solution to Africa’s debt crisis must address the structural imbalances in the global financial system that force countries to borrow at exorbitant rates to confront crises they did not create. This is why I have joined seven former African heads of state and government to establish the "African Leaders Initiative for Debt Relief," through which we seek a comprehensive reform of the global lending system, ensuring genuine debt relief and better borrowing conditions for developing countries.
In the "Cape Town Declaration" that we recently launched, we call for a broad-based debt relief initiative founded on equity and transparency, including a comprehensive debt restructuring encompassing all creditors—private, bilateral, and multilateral—through a predictable and inclusive process. Reducing interest rates and extending repayment periods are essential components to create sufficient financial space.
We also advocate for reforms in the global financial system aimed at abolishing the "African premium" and strategically investing in health, education, peacebuilding, and climate resilience, supporting the UN’s 2030 Sustainable Development Goals and the African Union’s Agenda 2063. The upcoming G20 Summit in Johannesburg this November presents an ideal opportunity to advance these objectives, with debt sustainability topping the agenda.
Debt relief for Africa is not charity; it is a matter of justice. We deserve a fair opportunity to get our house in order, invest in our people, and contribute to global economic growth, security, and resilience—not just to repay loans that perpetuate dependency and poverty. Through Nigeria’s economic reforms and continental responses to previous debt relief initiatives like the Heavily Indebted Poor Countries (HIPC) Initiative, we have demonstrated our ability and willingness to seize these opportunities.
Partial solutions will not suffice. Only by breaking the debt cycle—by treating us fairly as borrowers, amplifying our voices in multilateral institutions, and ensuring wealthier nations fulfill their climate finance commitments—can we achieve our full potential. This is in the best interest of the entire world. A strong, rapidly growing Africa is capable of playing a crucial role in supporting global supply chains, fostering innovation, and accelerating the transition to clean energy.
The "Cape Town Declaration" is our roadmap moving forward. The question now is: will the world walk this path with us?
