Nigeria Becomes 4th Most Expensive Country to Borrow in Africa as Interest Rates Soar

Nigeria has emerged as the fourth most expensive country to borrow in Africa, according to a new report by Nairametrics Research. This follows the Central Bank of Nigeria’s (CBN) aggressive monetary tightening, which has raised the Monetary Policy Rate (MPR) to an unprecedented 27.5% as of July 2025. Only Zimbabwe, Sudan, and Ghana rank higher in terms of borrowing costs. The MPR is a benchmark for lending rates in the country, and any increase pushes up the cost of credit across the economy—from personal loans to corporate financing.

Over the past 18 months, the CBN’s Monetary Policy Committee (MPC) has increased the MPR by a staggering 1,025 basis points. This has been part of efforts to curb stubborn inflation, counter the naira’s depreciation, and stabilize fiscal imbalances. Despite headline inflation easing slightly to 22.22% in June from 22.97% in May, food inflation and monthly price increases remain a concern. The CBN insists that high interest rates are necessary to anchor inflation expectations and attract foreign investment in a volatile economic environment.

However, analysts warn that these rate hikes are exacting a toll on businesses and the broader economy. While higher rates have improved yields on treasury bills and bonds, they have simultaneously worsened credit access for businesses, particularly small and medium-sized enterprises. Structural economic challenges like poor infrastructure, unreliable power supply, and policy inconsistency are already squeezing firms, and high borrowing costs are compounding the pressure.

The federal government is also bearing the brunt, with debt servicing costs rising sharply. Nigeria’s public debt now exceeds ₦100 trillion, and the cost of borrowing continues to mount as it struggles to fund budget deficits. Experts argue that the current policy mix is unsustainable without corresponding fiscal reforms. Without reducing the country’s dependence on imports or improving productivity in key sectors, monetary tightening alone cannot stabilize the economy.

This scenario mirrors the struggles of other African economies such as Zimbabwe and Sudan, where interest rates remain high due to persistent inflation and currency instability. Analysts emphasize the need for structural reforms in agriculture, manufacturing, and trade to alleviate supply bottlenecks. Until then, Nigeria’s position among the continent’s costliest borrowing environments is unlikely to change—leaving households, businesses, and the government burdened by the consequences of tight monetary policy.

Source: The sun