Nigeria, Others Face Rising Borrowing Costs Amid Policy Weaknesses – Moody’s

Borrowing costs for governments and businesses successful Nigeria, South Africa, and Kenya person surged successful the past 5 years owed to argumentation weaknesses, precocious inflation, and unfavourable marketplace conditions, a study by Moody’s Ratings has revealed.

The Reuters study, which examined recognition conditions crossed the 3 economies, painted a representation of mounting financing pressures that proceed to choke sovereign and firm equilibrium sheets adjacent arsenic improvement and maturation needs expand.

Moody’s Senior Vice President, Lucie Villa, commented connected the report, saying, “borrowing costs are precocious crossed the board.” She noted that “debt costs for banks, non-financial companies, and sovereigns person accrued successful each 3 markets alongside higher argumentation rates during the past 5 years.”

According to the ratings agency, though enactment from improvement partners has moderated overseas currency indebtedness costs, the alleviation has not been capable to offset the precocious terms of raising funds from section and planetary superior markets.

The study pointed retired that portion involvement spreads implicit U.S. Treasuries person eased for Nigeria and Kenya since 2022, they stay elevated astatine astir 500 ground points, underscoring the hazard premium investors connect to the 2 economies.

Moody’s identified Nigeria’s precocious ostentation and chronically debased savings rates arsenic factors stifling companies’ entree to affordable credit, adding that home argumentation gaps person amplified the strain connected the outgo of capital.

In Kenya, the study blamed excessive authorities borrowing and shallow section superior markets for crowding retired backstage assemblage entree to credit.

It noted that South Africa enjoys a much unchangeable pricing situation with deeper home markets and a comparatively credible monetary framework. However, owed to fiscal constraints, its financing costs inactive outstrip galore adjacent emerging markets.

“Without improvements, South Africa risks continuing a antagonistic spiral successful which precocious involvement rates aimed astatine attracting inflows amid subdued maturation bounds home concern and further hinder economical prospects,” the study warned.

Moody’s stressed that addressing the structural imbalances that support financing costs precocious successful these economies volition necessitate clip and accordant reforms to fortify argumentation frameworks.