Moody’s Turns Positive on Sub-Saharan Africa as Debt, Liquidity Improve

***• Nigeria, others’ outlook vulnerable to high debt-servicing costs, weak revenue ***

•Says borrowing costs to fall marginally by 2027

Emmanuel Addeh in Abuja

Sub-Saharan Africa’s sovereign credit outlook has turned positive for the first time in several years, with Moody’s Ratings citing improved economic policies, stronger commodity prices and better access to financing as factors helping governments across the region strengthen their fiscal positions.

The ratings agency, in a new regional assessment released yesterday, said reforms undertaken by several governments had helped the region withstand inflationary pressures, while improving liquidity conditions and stronger commodity revenues had eased some of the fiscal strain that had weighed heavily on sovereign borrowers.

Moody’s, however, warned that the positive outlook remained vulnerable to high debt-servicing costs, weak government revenue mobilisation, climate-related shocks and security risks across parts of the region.

Of the 25 sub-Saharan African sovereigns rated by Moody’s, only Botswana and Mauritius remain in the investment-grade category, which the agency considers to represent relatively low-risk borrowers.

However, eight of the 25 sovereigns currently have positive outlooks, indicating the possibility of future rating improvements if the underlying fiscal and economic trends continue. They are Nigeria, South Africa, Namibia, Angola, Togo, Ghana, the Republic of Congo and Zambia.

Thirteen countries have stable outlooks, while four have negative outlooks: Mauritius, Gabon, Mali and Senegal.

The inclusion of Nigeria among the eight countries with positive outlooks places Africa’s largest economy among the sovereigns Moody’s sees as having improving credit fundamentals, although the country continues to face substantial fiscal and debt-management challenges.

The positive regional assessment comes as several African governments have moved to strengthen fiscal frameworks, improve domestic revenue mobilisation, manage debt more actively and deepen local capital markets.

Moody’s identified Zambia and Ethiopia as the countries expected to record the biggest declines in debt levels, reflecting efforts to restore fiscal sustainability and restructure or manage their public finances.

The agency said it expects the economies of sub-Saharan Africa to grow by 4.3 per cent in both 2026 and 2027, measured as a weighted average across the countries it covers.

The projected growth represents a relatively resilient performance despite the fiscal and financing challenges confronting many African economies, particularly those still dealing with elevated borrowing costs and large refinancing requirements.

Moody’s also projected an improvement in the region’s overall borrowing requirements, forecasting that the amount governments would need to raise annually to finance fiscal deficits and refinance maturing debt would fall to 11.2 per cent of gross domestic product in 2027, from a peak of 12.3 per cent recorded in 2025.

In the same vein, the agency stated that it expects the improvement in financing conditions and fiscal consolidation to translate into a moderation in aggregate government debt.

Total government debt across the rated sub-Saharan African sovereigns is projected to level off at 56.6 per cent of Gross Domestic Product (GDP) in 2027, compared with 62.4 per cent in 2025.

Despite the improvement in the overall outlook, Moody’s cautioned that the region could still face significant downside risks.

A prolonged resurgence in inflation, severe weather events and a sudden withdrawal of foreign investors from African bond markets could reverse recent gains and place renewed pressure on sovereign liquidity and debt sustainability.

Climate change, it stressed, represents an additional risk for many countries because extreme weather events can simultaneously damage infrastructure, disrupt agricultural production, reduce government revenues and increase emergency spending.

Security challenges in parts of the region also remain a constraint on public finances and economic growth, particularly where governments are required to devote increasing resources to security while dealing with weaker investment and economic activity.