Governments and businesses in Nigeria, Kenya, and South Africa are grappling with sharply rising borrowing costs, a trend that poses serious risks to economic growth across Sub-Saharan Africa, according to a new report by Moody’s Ratings.
Over the past five years, debt servicing costs have surged in all three economies due to weak policy frameworks, inflationary pressures, and unfavorable market conditions. “Borrowing costs are high across the board,” said Moody’s Senior Vice President Lucie Villa. “Debt costs for banks, non-financial companies and governments have increased in all three markets alongside higher policy rates during the past five years.”
Nigeria faces some of the steepest challenges. Soaring inflation and low domestic savings have made affordable credit scarce, especially for businesses. While international spreads have narrowed slightly since 2022, they remain elevated at around 500 basis points — well above global norms. In Kenya, heavy government borrowing and shallow capital markets have crowded out private sector access to credit. Moody’s warns this could strain fiscal sustainability and deter investment. South Africa, despite enjoying deeper domestic markets and a stronger monetary framework, still suffers from elevated rates due to fiscal constraints. Moody’s cautioned that without structural reforms, South Africa risks a “negative spiral” of high rates and low growth.
The Moody’s report urges comprehensive financial reforms to lower borrowing costs and safeguard long-term development. While concessional loans have eased some pressure, local borrowing remains expensive — threatening investment and economic resilience across the region.
