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 critical development priorities.
According to the report, debt servicing is absorbing an increasing share of government resources as countries grapple with higher costs of servicing their 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 on public debt rival or exceed public health expenditure as a share of gross domestic product.
The AfDB said the trend underscores how rising debt-service obligations can displace critical development spending, making stronger domestic revenue mobilisation and effective debt and liability management increasingly important.
Debt service consumes larger share of government revenue
The report revealed that the share of government revenue allocated to external debt service across Africa increased from 23.7 per cent in 2017 to 31 per cent in 2024, reflecting mounting 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 rose from an average of 10 per cent between 2015 and 2019 to 16.7 per cent between 2020 and 2023.
Benin also recorded a significant increase, with the ratio climbing from 7.7 per cent to 16.5 per cent over the same periods.
The AfDB said external debt service increased as a share of government revenue in most West African economies, putting additional pressure on governments to balance debt obligations with spending on essential public services.
High debt linked to weaker productivity
The AfDB also linked high public debt to weaker productivity, estimating that a 1 per cent increase in public debt is associated with declines of 4.9 per cent in labour productivity and 4.6 per cent in total factor productivity.
It attributed part of the relationship to the crowding-out effect of large interest payments, which can limit government investment in infrastructure, social services and institutions.
The bank added that heavy government borrowing could also increase financing costs for the private sector, further constraining economic activity and productivity.
Nigeria’s debt-servicing costs
The report comes as Nigeria continues to commit substantial resources to servicing both its external and domestic debt.
Nigeria spent $954.06 million servicing its external debt obligations in the first quarter of 2026, representing a 31.5 per cent decline from the $1.39 billion recorded in the corresponding period of 2025.
However, domestic debt-servicing costs increased during the period.
The country spent N3.14 trillion servicing domestic debt in Q1 2026, up 20.3 per cent 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 stressed that stronger domestic revenue mobilisation, prudent borrowing and effective liability management would be critical to preserving fiscal space and ensuring that debt does not continue to crowd out essential development spending.
