Nigeria's Rate Is 26.5%. South Africa Just Hiked to 7%. Why African Central Banks Are Tightening While the World Eases.
While central banks in Europe, Canada, and parts of Asia were cutting rates through 2025, most African central banks were moving in the opposite direction, raising rates sharply or holding them at levels that make borrowing painfully expensive for businesses and households. In 2026, that divergence is widening.
Zimbabwe maintains Africa's highest policy rate at 35%, a level authorities say is necessary to anchor inflation expectations and restore confidence in the Zimbabwe Gold currency introduced two years ago. Nigeria held its benchmark rate at 26.5% at its May 2026 meeting, after cutting by 50 basis points in February when headline inflation fell to 15.10%, its tenth consecutive monthly decline. Central Bank of Nigeria Governor Olayemi Cardoso acknowledged that previous tightening measures were beginning to moderate inflationary pressures, but noted that Middle East tensions continued to threaten energy and transport costs. Egypt maintained its deposit rate at 19% and lending rate at 20%, citing an unfavourable external environment. Angola held at 17%, Sierra Leone at 16.75%, and Ethiopia at 15%.
South Africa moved in the opposite direction from most of the continent. The South African Reserve Bank raised its repo rate by 25 basis points to 7% on May 28, 2026, its first hike since 2023. Four of six MPC members backed the decision. The committee cited increased inflation risks from the Middle East crisis and warned that overlapping shocks could trigger second-round effects across the economy. Inflation forecasts for South Africa were revised upward to 4.4% for 2026, up from a prior estimate of 3.7%, with fuel inflation running above 18%.
The structural reason for Africa's high rates is consistent across countries: imported inflation, currency weakness against the dollar, and the need to attract foreign capital to finance fiscal deficits. When the dollar strengthens globally, African currencies face immediate depreciation pressure, which raises import costs and reignites inflation.
For African businesses trying to borrow and invest, benchmark rates between 14% and 35% make commercial lending prohibitively expensive. The human cost of monetary tightening in low-income economies is higher than in advanced ones because households and businesses have fewer financial buffers and less access to alternative sources of capital.
