More than a decade after some of the world's leading economies wrote off billions of dollars of African debt, the continent could be headed for a funding crisis as the era of cheap money comes to an end.
Nigeria and other countries loaded up on cheap debt over the past decade, taking advantage of record low interest rates in the US, UK and Europe.
With the US Federal Reserve's rate hike this week by 25 basis points to 1.75%, the sixth hike in three years, the sustainability of African countries' debt is now being questioned by analysts.
Egged on by international pressure, the world's leading lenders, such as the IMF, cancelled 100% of the obligations of highly indebted poor countries in 2005. But by 2013, according to estimates by the UN Conference on Trade and Development, Africa's external debt stock had rapidly grown to $443-billion due to bilateral borrowing, syndicated loans and bonds.
Earlier this month, the IMF warned that Nigeria's interest payments to revenue may rise to over 80% in the next four years, from 27% in 2014 and 71.9% last year.
African governments "have gotten into the habit of settling upcoming debt payments with Eurobonds but this year, we've seen them taking on much longer tenured debt, as far as 30-years", said Lisa Brown, a country risk analyst at Rand Merchant Bank.
"So the higher your debt-servicing costs, the less of your budget goes to productive spending."
Revenues are not going into investment and consumption-spurring activities.
"That's how it [debt-servicing costs] can affect growth," Brown said.
As interest rates rise in the US and elsewhere, the cost of dollar-denominated debt rises compared to debt in local currency.
Nigeria's debt to GDP is only expected to reach 25.3 % this year and is still far off the levels reached by delinquent European nations such as Greece at the height of its sovereign debt crisis, but the cost of servicing the debt is consuming an ever larger share of federal government revenue.
Nigeria is not alone. The IMF warned last year that public debt had risen in many Sub-Saharan African countries. The median level of debt in Sub-Saharan Africa increased from 34% in 2013 to 48% of GDP in 2016.
Last year Mozambique defaulted on its debt; it is now in negotiations to restructure loans of almost $2-billion (about R24-billion).
Phumelele Mbiyo, head of Africa Research at Standard Bank, said the increase in the debt-to-GDP ratio when driven by domestic debt was less of an issue than when it was driven by external debt.
In August the IMF said Ghana faced a high risk of external debt distress as a result of total public debt - the majority being external - reaching 73.9% of GDP in 2016. This week the IMF said the country was still at risk of debt distress with interest payments absorbing about 40% of tax revenue.
Zambia was another country at high risk of external debt distress as its debt-to-GDP ratio is expected to rise from 34.5% in 2017 to 44.3% of GDP in 2020.
Mbiyo said the US tightening cycle could see an increase in the US 10-year Treasury yield to a range of 3% or 4% on the back of the Fed hiking the Fed Funds rate to over 3% next year, as Standard Bank has forecast. This would not discourage investment in Africa, but would make it harder to attract new investors for some nations.
"Will it make sense for many of these governments to continue to borrow at those sorts of [higher] yields? Well it depends on the project they are engaging in and the use to which they put those funds," he said.
Brown said that if you have foreign portfolio outflows from emerging markets, it could place depreciatory pressure on those countries' currencies, further highlighting the exchange rate risk that these countries are exposed to.
[The normalisation of interest rates] will expose poor revenue systems, it will expose undiversified export bases, except now it is all countries, not just an oil shock where you have winners and losers.
"There are a few countries whose fundamentals are in place to not be negatively affected by mulitiple rate hikes," she said.
Ridle Markus, Africa strategist at Absa Capital, said while there was "every chance" the cost of foreign financing would become more expensive, the investor appetite towards emerging emerging markets and frontier markets has improved significantly. in recent months. He said in recent months Kenya, Cote d'Ivoire, Senegal and Nigeria had all issued bonds that were oversubscribed...