The year 2025 arrived with a stark reckoning for Africa, as a decade of escalating debt came due. Economies, burdened by heavy borrowing, faced a critical juncture, forcing policymakers to seek alternatives to the long-dominant U.S. dollar.
A quiet revolution began to unfold. Kenya and Ethiopia spearheaded a bold strategy: swapping dollar-denominated loans for China’s renminbi (yuan). This wasn’t merely a financial maneuver; it was a calculated move to reduce costs and shield themselves from the volatility of currency fluctuations. Kenya alone saved $215 million annually on its railway debt.
The ripple effect was swift. By late 2025, a growing number of nations – Nigeria, South Africa among them – were actively exploring renminbi settlements for trade. This signaled a significant test of China’s ambition to establish the yuan as a global currency, starting on African soil.
But the shift wasn’t solely towards the yuan. The United Arab Emirates’ dirham emerged as a crucial link between the Gulf states and African nations. Morocco and Egypt forged agreements for renewable energy projects, financed through dirham-denominated sovereign wealth funds fueled by oil revenues.
Benin and Morocco demonstrated the potential of these new strategies, securing deals with returns of 8 to 10 percent, even as interest rates declined elsewhere. Nigeria cautiously re-entered the market with naira-denominated instruments, while Tanzania debuted its first Islamic bond, a sukuk, channeling funds into vital infrastructure projects without the constraints of traditional interest.
These successes weren’t accidental. IMF-backed reforms improved the economic outlook of several countries, and favorable commodity prices – gold for Ghana, cocoa for Côte d’Ivoire – provided a crucial buffer against external shocks. The market responded, with Kenya’s 2028 Eurobond yield falling by a notable 2 percent.
This resurgence revealed a hidden strength: untapped potential. Africa’s corporate debt markets were evolving, driven by private credit and syndicated loans as sovereign lending diminished, according to recent analyses.
However, the narrative wasn’t universally positive. Twenty sub-Saharan African countries teetered on the brink of financial distress, and a staggering thirty-two were allocating more resources to debt servicing than to essential healthcare. Zambia’s economy contracted during a severe drought, highlighting its continued vulnerability even after restructuring.
Senegal faced hidden financial risks, and Mozambique’s economy remained fragile after devastating cyclones. Egypt and Angola carried particularly heavy debt burdens – $13 billion and $4 billion respectively – a stark reminder of the challenges ahead. The IMF identified Chad, Ethiopia, and South Sudan as “unsustainable,” their vulnerabilities exacerbated by the escalating costs of climate change.
The total external debt service reached a staggering $89 billion, dwarfing foreign direct investment and trapping nations in a relentless cycle of debt. This underscored the urgent need for diversification and innovative financial strategies.
The rise of the yuan, dirham, and to a lesser extent, the Japanese yen, represented a deliberate attempt to break free from dollar dominance. The yuan led in volume, the dirham offered diversification, and the yen filled niche infrastructure needs. This shift could redefine the geopolitical landscape, diminishing the influence of U.S. monetary policy.
While some cautioned against creating new dependencies, for nations struggling with limited resources, these alternatives offered a pragmatic path forward. As 2025 drew to a close, Africa’s debt journey offered valuable lessons. Angola’s market return and Kenya’s successful swaps demonstrated the power of adaptability, while Senegal’s struggles highlighted the importance of transparency.
Looking ahead to 2026, analysts anticipate continued diversification and increasingly sophisticated debt negotiations as African economies strive to build resilience against future economic storms.
