S&P: Nigeria, Other African Nations Face $90 Billion Debt Wall in 2026

• Egypt, Angola, South Africa, Nigeria lead  

•JPMorgan to launch new frontier market local currency debt index

Emmanuel Addeh in Abuja

S&P Global Ratings has cautioned that African governments face rising debt risks as hard-currency repayment schedules in 2026 increase pressure on external buffers, contributing to rollover risks.

The agency’s latest African sovereign outlook report showed that government external debt repayments are now over three times larger than in 2012, a Reuters report said.

“Structurally high debt and low, concentrated revenue bases will continue to pose key risks and, with government external debt repayments likely to exceed $90 billion this year, external vulnerabilities have also increased,” S&P’s Benjamin Young wrote in the report. “Government external debt repayments are approaching a peak,” he added.

Egypt accounts for nearly one-third of this year’s tally with $27 billion due in principal repayments, followed by Angola, South Africa, and Nigeria.

S&P noted that average sovereign ratings in the region have reached their highest levels since late 2020, reflecting reform momentum and improved growth. However, it was a sign of key credit metrics stabilising rather than significantly improving, as structural adjustments to reduce debt burdens tended to require longer timelines, S&P analysts said.

Easing global financial conditions and investors seeking to diversify their investments have reopened the door for a number of African sovereigns to tap global capital markets.

However, some of them, such as Republic of Congo, had to offer double-digit yields in recent months, widely seen as too expensive for issuers, and a number of governments have resorted to off-market deals such as private placements or total return swaps.

Economic growth is projected to remain steady, with average real Gross Domestic Product (GDP) growth forecast at 4.5 per cent in 2026, while fiscal deficits are expected to modestly consolidate to 3.5 per cent of GDP. Nevertheless, government debt is anticipated to stay elevated at around 61 per cent of GDP on average, the report said.

The rising debt redemption burden is leading several governments to turn to liability management strategies, such as buybacks, exchanges, and maturity extensions, to reduce refinancing risks.

Notable users of such approaches include Côte d’Ivoire, Benin, Uganda, Republic of Congo, Mozambique, Kenya and South Africa.

Meanwhile, JPMorgan is finalising plans for a new index to track frontier market local currency bonds, investors consulted on the details told Reuters, as the bank looks to satisfy a growing appetite for riskier and more diversified high-yield debt.

The move, which comes 15 years after the Wall Street bank launched its hard-currency NEXGEM frontier index, coincides with the year-long slump in the dollar and some extraordinary recent rallies in other markets.

Six leading money managers who spoke to Reuters on condition of anonymity said the bank’s engagements with them reached an advanced stage in the second half of last year.

The proposed index includes 20 to 25 countries, with Nigeria, Egypt, Vietnam, Kenya, Morocco, Kazakhstan, Pakistan, Sri Lanka and Bangladesh having the largest “weightings”, three of the managers said.

According to one source, there would be a limit that means no country has a weighting of more than 8 per cent. A second source said an earlier consultation document had a proposed 10 per cent limit.

It is also set to only include bonds of at least $250 million equivalent, although that has raised issues around Zambia, which many would like to see included but has traditionally only sold smaller individual bonds.

“We expect they (JPMorgan) will give us a formal structure for the index around June with the opportunity to make some final comments,” said one senior fund manager. “They are then likely to formally launch (the index) next year, we think.”

Another senior fund manager said the initial announcement might be as early as the end of March, which could also bring the formal launch date forward. FTSE Russell has already had an equivalent index since 2021. JPMorgan’s versions, however, are more prominent among emerging market money managers, who effectively use them to compile their funds and measure their performance.

Analysis by Neuberger Berman estimates tradable local-currency debt has trebled over the last decade to around $1 trillion, Reuters said.

It also calculates that over the last eight years, frontier market local FX debt had outperformed JPMorgan’s mainstream emerging market local currency index by almost 2.5 percentage points, and also outstripped the EM dollar bond index.

“We see that as a confirmation that frontier market growth and general economic performance has been systematically underpriced,” Neuberger Berman’s Rob Drijkoningen said.

According to the World Bank, frontier economies are home to a fifth of the world’s population but account for just 3.1 per cent of global capital flows and less than 5 per cent of global GDP.

Their populations, however, are expected to increase by another 800 million over the next 25 years — more than the rest of the world combined – meaning they will play an increasingly important role in global economic growth.