HIGH BORROWING COSTS THREATEN AFRICA’S MERGERS, ACQUISITIONS

Surging borrowing costs across African markets are posing a serious threat to mergers and acquisitions (M&A) activities on the continent, potentially slowing deal flows and corporate growth strategies, industry experts have warned.

According to a new report by a leading financial advisory firm, high interest rates and tighter credit conditions have significantly raised the cost of capital, making it difficult for companies to finance large transactions. Many potential deals are being delayed or abandoned as lenders adopt more cautious approaches amid global economic uncertainties and domestic inflationary pressures.

“High borrowing costs are creating a major barrier for M&A in Africa. What used to be viable transactions with reasonable leverage are now prohibitively expensive,” said Mr. Adebayo Olawale, Managing Partner at a prominent Lagos-based investment bank. He noted that private equity firms and corporate buyers are struggling to secure affordable debt, particularly in key sectors like fintech, energy, and consumer goods.

The situation is exacerbated by monetary policy tightening in major economies, which has led to capital flight from emerging markets and higher risk premiums for African borrowers. Countries such as Nigeria, Kenya, South Africa, and Egypt have witnessed sharp increases in lending rates, dampening investor appetite for cross-border and domestic consolidations.

Analysts say the slowdown could hinder Africa’s economic integration goals and limit the ability of local champions to scale through acquisitions. Smaller businesses and startups, which often rely on M&A for exit opportunities, are particularly vulnerable.

However, some experts see opportunities in alternative financing. “While traditional bank lending is expensive, there is growing interest in structured equity, green bonds, and development finance institution support for strategic deals,” noted Ms. Fatima Diallo, a regional economist at an international think-tank.

Stakeholders are calling on governments and central banks to implement measures that ease financing conditions without compromising macroeconomic stability. As Africa seeks to attract more foreign direct investment, addressing the high cost of borrowing remains critical to sustaining M&A momentum and driving long-term industrial growth.

The coming months will be decisive as market participants monitor interest rate trends and policy responses across the continent.