West Africa in Focus /

Debt sustainability concerns rise for African countries

  • Ghana and Sierra Leone are at high risk of debt distress, but we are not surprised

  • Nigeria's mobile money sector develops with the award of a PSB license to Airtel but Ghana's takes a hit from the E-levy

  • Ghana's government retains petroleum tax despite skyrocketing inflation

Debt sustainability concerns rise for African countries
Janet Ogabi
Janet Ogabi

Senior Research Analyst

Tellimer Research
5 May 2022
Published byTellimer Research

As global attention shifts from Covid to geopolitics, African countries still have a lot to worry about. The IMF's head of regional studies in the African unit stated that 20+ countries on the continent are at risk of debt distress, and Ghana appears to be particularly vulnerable, according to WEO data and our own analysis. We also highlight Ghana's inflation challenges, with the government refusing to cut fuel tax.

Meanwhile, developments continue in West Africa’s mobile money landscape: Airtel Nigeria has joined MTN Nigeria as a recipient of a mobile money license, setting the stage for mobile money to take off in the country. In Ghana, though, the sector has taken a hit, after implementation of the E-levy.

Debt sustainability concerns heighten for African countries

African countries are not getting a break. They have been extremely vulnerable to global events, from Covid to raging inflation to the Russian war on Ukraine, exacerbating fiscal challenges.

Last week, the IMF's head of regional studies in its African unit stated that 20+ countries on the continent are at risk of debt distress. Although no specific economies were mentioned, the recent World Economic Outlook highlighted high risks for Ghana and Sierra Leone.

Ghana, Sierra Leone, Guinea-Bissau and Cape Verde are at a high risk of debt distress

This is no surprise to us. Our Debt Sustainability Index shows Ghana and Kenya have particularly vulnerable debt sustainability positions. Ghana's central bank has had to do some heavy lifting by raising rates after the government ruled out an IMF facility. 

Request access to our sovereign debt sustainability data set here. 

Airtel Africa joins MTN Nigeria, obtains final approval for PSB

Following in the footsteps of MTN Nigeria, Airtel Nigeria has finally secured approval to operate a payment services bank (PSB). Africa's mobile money growth in 2022 is expected to come in large part from Nigeria and Ethiopia, where development of the sector is still nascent, financial inclusion is still low and the populations are enormous.

We welcome PSB license approval for MTN and Airtel as they can be excellent catalysts for financial inclusion. MTN has a competitive advantage based on its strong agency network (Airtel just acquired a super-agent license that MTN has had for a few years), its market leadership in mobile services and the resulting network effect.

Mobile money performance indicators of telcos in Africa

Ghana's E-levy comes in, threatening financial inclusion growth

Ghana's lawmakers last month approved a 1.5% E-levy on all electronic transactions above GHS100 – this includes all inward remittances (to be paid by the recipient), all person-to-person (P2P) mobile transactions (and bank transfers) and all point-of-sale (POS)/merchant payments.

Ghana mobile money users react to the E-levy bill

As expected, the development has generated a backlash from the general public. We believe it could be detrimental to the country's financial inclusion drive in the short and medium terms. The deputy finance minister has said they anticipate a 24% attrition rate within six months of implementation.

Ghana resists call for petroleum tax removal

In Ghana, the effects of the global rise in the prices of petroleum products have been exacerbated by the petroleum taxes added to pump prices. Energy consumers have been calling for the removal of these taxes to soften the impact on inflation, which in March spiked to 19.4%, the highest rate since August 2009.

Increase in energy prices has been key driver of inflation

Ghana's President Akufo-Addo, in a May Day celebration speech, stated that the country could not afford the removal of the taxes, which could cost the government GHS4bn in revenue per annum.

As we have discussed, Ghana has been making efforts to improve its fiscal position by lowering spending and increasing taxes, in a bid to cut the budget deficit from a projected 12.1% of GDP in 2022 to the target level of 7.4% of GDP.

Cleantech funding finally gets the spotlight

West Africa-based pay-as-you-go (PAYG) solar company (origin: Ghana), PEG Africa, has been acquired by Bboxx, a cleantech startup that provides clean energy in Africa but is headquartered in London. The deal would put the company's valuation at over US$300mn, based on reports.

The news comes just after Kenya's Sun King (formerly known as Greenlight Planet) announced it had raised US$260mn in series D funding, led by BeyondNetZero.

It is good to see capital flows to cleantech, which, unlike fintech, does not often top the private capital deal books. However, as we stated in our recent report on Nigeria, solar and other clean technologies are growing rapidly and should elicit increasing investor interest.

Cleantech makes up only 5% of total US$4.6bn disclosed funding in Africa in 2021

Upcoming events

Inflation: Ghana (11 May), Nigeria (16 May)

The IMF expects inflation to rise in 2022, given the global food and energy supply situation – the Fund expects Ghana's and Nigeria's inflation rates to close the year at 15.8% and 15.6%.

As we have noted, the Russia-Ukraine war has enormous implications for Africa's inflation – we expect numbers for both countries to increase in this week's data releases.

Our recent West African reports


Gains persisted in the Nigerian stock market as the NGX ASI gained 3% wow (versus 1.6% in the previous week), bringing ytd returns to 17%. This marks the fourth week of consecutive gains – the positive sentiment is driven by investors taking positions as Q1 earnings releases roll out and the reinvestment of dividend payments. Investors are also taking positions in local palm oil producers like PRESCO (+9.6%) and OKOMU (+10.0%) with Indonesia having banned palm oil exports.

We see the positive sentiment continuing in the short term, swayed by broadly positive earnings releases in the coming weeks. In the long term, our outlook for Nigerian equities is unchanged: FX restrictions will keep Nigeria off-limits for fresh capital from foreign investors, while locals will dominate. There are already signs of rising domestic yields, which might cause domestic interest in the equities market to wane.

Tellimer's West Africa Equities Coverage

Market indicators

Nigeria's yield curve (%)

Ghana's yield curve (%)