African Borrowers to Benefit from Weak U.S. Dollar – S&P
African sovereign borrowers are poised to benefit from a weaker U.S. dollar, which alleviates imported inflation and lessens the local-currency burden of external debt, according to a non-rating commentary note from S&P.
The firm highlighted that improving global liquidity, resulting from the tight global monetary policy aimed at controlling inflation between April 2021 and April 2023, has increased investor appetite and non-resident inflows into local-currency bond markets.
Top investment destinations include Egypt, Nigeria, Uganda, and Zambia, saying the trend stabilises foreign exchange (FX) and lowers local currency yields.
S&P noted, “Easier global monetary policy conditions should also facilitate access to foreign currency financing. Spread compression enhances market access, as investors demand a smaller risk premium.”
This scenario enables better refinancing and liability management, which analysts at S&P expect to rise, adding that market access typically improves before price relief is realised.
However, the benefits from these factors will be unevenly distributed. Sovereigns that maintain sound monetary frameworks, exhibit fiscal consolidation momentum (evidenced by improved revenue collection), and possess adequate reserve buffers are better positioned to attract sustainable inflows.
S&P cautioned that the reversibility of portfolio flows and dependency on non-resident borrowing pose risks, increasing exposure to dollar volatility. It said commodity price cycles significantly influence African sovereign borrowing dynamics, reinforcing the region’s procyclical credit profile.
For commodity exporters such as Angola, Nigeria, Zambia, and Ghana, rising prices for oil, copper, or gold enhance trade balances, boost fiscal revenues, and support FX reserves. “These factors typically lead to spread compression and improved market access,” S&P stated.
The firm anticipates that Nigeria and Angola will borrow more in 2026 than they did last year, as additional pre-election spending is likely to constrain favourable oil-sector dynamics and the revenue gains from ongoing tax reforms and revenue-collection measures.
“Ghana will also increase borrowing this year as it resumes capital spending following austerity measures enacted in 2025 in response to significant fiscal slippages in 2024. Ghana and Zambia stand to benefit from renewed investor interest as they approach the conclusion of their prolonged debt restructurings.
S&P said in January 2026, the Bank of Zambia raised the limit on local currency bonds that non-residents can purchase in the primary market from 5% to 23%, attracting substantial inflows in recent months.
“While Ghana’s macroeconomic environment is improving, the government has yet to restart issuing bonds with maturities over one year. Additionally, yields on short-tenor treasury bills have fallen sharply. We expect the government to gradually begin issuing longer-dated bonds, thereby extending its maturity profile.”
Meanwhile, S&P emphasised that low savings rates and limited domestic financing capacity constrain local-currency borrowing for many sovereigns.
Significant divergences exist in the depth and structure of African domestic banking systems, as well as in the currency composition of borrowing and the associated costs.
In the absence of cheaper bilateral and multilateral funding sources, most countries in this group—including Nigeria, Angola, Uganda, Zambia, and Ghana—exhibit interest-to-revenue ratios at least double the global average of approximately 9%. AXA Mansard Targets N3.617bn Profit in Six Months
