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IN a surprising departure from Nigeria’s decision to raise interest rates, many African central banks are anticipated to adopt a monetary easing strategy, cutting interest rates to boost economic growth amid a challenging global environment.
Over the next three weeks, most African central banks reviewing interest rates are expected to reduce them, mindful that opportunities to ease further could diminish after Donald Trump assumes the U.S. presidency.
Of the 14 monetary authorities scheduled to announce rate decisions, eight—including South Africa and Kenya—are expected to cut rates, five are anticipated to hold steady, and one—Nigeria—is predicted to hike rates.
While domestic conditions will ultimately guide their decisions, African central banks will find it difficult to ignore Trump’s November 5 election victory, which has unsettled emerging markets as investors anticipate his policies could strengthen the U.S. dollar and lead to higher U.S. interest rates.
“Trump’s stated policies, such as increased tariffs and a larger U.S. budget deficit, are likely to drive inflation and limit the ability of African central banks to cut interest rates in 2025,” Bloomberg quoted EY Africa Chief Economist Angelika Goliger as saying.
A stronger U.S. dollar poses challenges for African nations, increasing the cost of imports and dollar-denominated debt. Rising U.S. interest rates could also redirect capital flows away from emerging markets, compelling monetary authorities to raise borrowing costs to support their local currencies.
Already, “emerging market currencies have depreciated by as much as 5 percent since Donald Trump won the U.S. election earlier this month, heightening inflationary risks,” said Yvonne Mhango, Africa economist at Bloomberg Economics. “This will likely make African central banks that were easing less inclined to continue on that path.”
Angola, the Democratic Republic of Congo, Egypt, and Ghana are expected to maintain their interest rates due to concerns over double-digit inflation and the pressures of a stronger dollar.
Botswana, which has one of Africa’s lowest inflation rates at 1.6 percent, is also likely to keep borrowing costs steady, anticipating rising price pressures as its economy recovers from a prolonged downturn in diamond prices—its primary export—and dollar strength.
In Nigeria, policymakers are expected to hike rates on November 26 to combat rising inflation driven by higher gasoline prices, currency weakness, and recent floods. The country has already raised rates from 11.5 percent to 27.25 percent in just over two years and plans further increases until inflation is brought under control.
The South African Reserve Bank’s Monetary Policy Committee (MPC) voted to cut interest rates by 25 basis points to 7.75 percent on Thursday, citing a recent slowdown in inflation but cautioning that risks require a measured approach.
Reserve Bank Governor Lesetja Kganyago stated that the decision was unanimous, adding, “I think 25 basis points is cautious because the environment is uncertain and calls for caution. Inflation in the U.S. surprised by exceeding expectations, and similarly in the UK. In the Euro area, wages are rising at their fastest rate since 2000. This highlights the uncertainty we face.”
The rate cut also lowers South Africa’s prime lending rate—used by commercial banks to set borrowing costs—by 0.25 percentage points to 11.25 percent.
Similarly, central banks in Eswatini, Lesotho, and Namibia, whose currencies are pegged to the South African rand, are predicted to cut rates by a quarter-point amid slowing inflation.
Kenya, Gambia, Rwanda, and Mozambique, where inflation is either low or declining, are also expected to reduce rates.
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