Nigeria and Ghana are among West African economies where interest payments on public debt rival or exceed government spending on healthcare, highlighting the growing pressure debt servicing is placing on scarce public resources.

The African Development Bank (AfDB) disclosed this in its Regional Economic Outlook (REO) 2026 for West Africa, warning that rising debt-service costs are narrowing the fiscal space available for infrastructure, healthcare and other development priorities.

The report said debt service is absorbing an increasing share of government resources as countries face higher costs of servicing external obligations.

“The crowding-out is starkest when set against social spending,” the AfDB said, noting that 25 of 51 African countries with available data spent more on external-debt interest payments than on healthcare between 2021 and 2023.

The bank identified Nigeria and Ghana among the West African economies where interest payments rival or exceed public health expenditure as a share of gross domestic product.

According to the AfDB, the trend demonstrates how rising debt-service obligations can displace critical development spending, making stronger domestic revenue mobilisation and effective debt and liability management increasingly important.

The AfDB said the share of government revenue allocated to external debt service across Africa rose from 23.7% in 2017 to 31% in 2024, reflecting growing fiscal pressure across the continent.

The increase has been particularly pronounced in several West African economies.

In Cabo Verde, external debt service as a share of government revenue increased from an average of 10% between 2015 and 2019 to 16.7% between 2020 and 2023.

Benin also recorded a sharp increase, with the ratio rising from 7.7% to 16.5% over the same periods.

The AfDB said external debt service increased as a share of government revenue in most West African economies, placing additional pressure on governments to balance debt obligations with spending on essential public services.

The bank also linked high public debt to weaker productivity, estimating that a 1% increase in public debt is associated with declines of 4.9% in labour productivity and 4.6% in total factor productivity.

It attributed part of the relationship to the crowding-out effect of large interest bills, which can reduce government investment in infrastructure, social services and institutions.

The AfDB added that heavy government borrowing can also raise financing costs for the private sector, further constraining economic activity and productivity.

The report comes as Nigeria continues to devote substantial resources to servicing both external and domestic debt.

Nigeria spent $954.06 million servicing its external debt obligations in the first quarter of 2026, down 31.5% from the $1.39 billion recorded in the corresponding period of 2025.

However, domestic debt-service costs increased during the period.

The country spent N3.14 trillion servicing domestic debt in Q1 2026, representing a 20.3% increase from the N2.61 trillion recorded in Q1 2025.

The AfDB said the rising debt-service burden across West Africa reinforces the need for governments to ensure that borrowing is matched by improvements in the efficiency of public investment.

It also stressed that stronger domestic revenue mobilisation and effective liability management would be critical to preserving fiscal space and ensuring that debt does not continue to crowd out essential development spending (Arise News)

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