Borrowing costs for governments and businesses in Nigeria, South Africa, as well as Kenya have increased significantly over the past five years due to weak policy frameworks, inflationary pressures, and adverse market conditions.
According to Moody’s Ratings, this surge has led to mounting financing pressures, straining sovereign and corporate balance sheets.
“Borrowing costs are high across the board,” said Lucie Villa, Moody’s Senior Vice President.
“Debt costs for banks, non-financial companies, and sovereigns have increased in all three markets alongside higher policy rates during the past five years.”
Countries with specific challenges include Nigeria which has high inflation and low savings rates have restricted access to affordable credit for businesses and households.
Domestic policy gaps have further amplified the strain on the cost of capital.
Also, Kenya has excessive government borrowing and shallow local markets have limited private sector access to credit. Rising debt-servicing costs have also heightened fiscal risks.
For South Africa, despite a more stable pricing environment and deeper domestic markets, fiscal constraints keep financing costs high. “Without improvements, South Africa risks continuing a negative spiral in which high interest rates aimed at attracting inflows amid subdued growth limit domestic investment and further hinder economic prospects,” the report warned.
The report emphasizes that addressing these structural imbalances will require time and consistent reforms to strengthen policy frameworks. While international borrowing costs have moderated since 2022, local market conditions remain restrictive, keeping financing expensive for both sovereigns and corporates.
