CAIRO, April 27 – S&P Global Ratings says Africa’s improving sovereign credit outlook is now under pressure from the economic fallout of the Middle East conflict, which is driving up energy prices, inflation, and borrowing costs across the continent.
At the start of 2026, the outlook for African sovereign credit was positive after two years of rating improvements. However, a sharp rise in oil prices, with Brent crude up about 50% year-to-date, has shifted expectations. S&P now assumes an average oil price of $85 per barrel for the rest of the year.
Higher energy costs are expected to weaken balance of payments positions for many African countries, particularly net importers. Governments that had recently removed fuel subsidies may face pressure to reintroduce them, while rising inflation could increase demand for foreign currency, putting additional strain on exchange rates and domestic financing conditions.
The report highlights that second-round effects from the shock, including higher fertilizer prices and disrupted trade routes, could reduce food production and raise living costs for households. Supply chain disruptions are also affecting exports such as gold and diamonds, many of which pass through Middle Eastern trade hubs.
S&P expects borrowing costs across Africa to rise as global risk aversion increases. Domestic interest rates, which had eased in recent years, may begin climbing again as inflation pressures return.
The agency identified several countries as particularly exposed to these risks, including Egypt, Mozambique, and Rwanda. By contrast, countries such as Morocco, Botswana, and Republic of the Congo, along with oil exporters like Nigeria and Angola, are better positioned due to stronger external buffers or export revenues.
Large oil exporters could benefit from higher crude prices, although gains may be limited by continued reliance on imported refined fuels. Nigeria may fare better than peers due to its expanding domestic refining capacity, including output from the Dangote refinery.
Trade dynamics are also shifting. While African countries import only about 11% of goods from the Middle East, the region remains a critical supplier of refined fuel and sulfur used in fertilizer production. Around 40% to 45% of sulfur shipments from the Middle East are destined for Africa, making countries like Democratic Republic of the Congo and Zambia particularly vulnerable due to their mining sectors.
The Middle East also plays a key role as a trading hub. Cities such as Dubai serve as major transit points for gold and diamonds exported from countries including Ghana, Uganda, and Ethiopia.
S&P expects current account balances across Africa to weaken, while inflation is likely to rise again. Although energy has a relatively small weight in consumer price indices, its indirect impact on food and transport costs is significant. More than 75% of rated African sovereigns are net importers of both fuel and fertilizer.
Fiscal pressures are also mounting. While fuel subsidies remain relatively low across the continent, countries like Angola stand out, with subsidies accounting for a significant share of GDP. Others, including Senegal and Uganda, face heightened risks due to large fiscal and external deficits.
Debt sustainability is another concern. African sovereigns already spend about 17% of government revenues on interest payments, far above the global average. This leaves limited fiscal space to respond to shocks, especially when combined with spending on wages and essential services.
Foreign exchange reserves, which had improved in recent years, are also expected to come under pressure. On average, reserves cover about three months of imports, but this buffer may shrink as current account deficits widen, particularly for oil-importing nations.
Despite these challenges, some mitigating factors remain. Stronger local capital markets in countries like South Africa and Morocco provide alternative financing options, while concessional funding and multilateral support could ease pressure for some economies.
S&P’s base case assumes the conflict will gradually ease and key trade routes such as the Strait of Hormuz will reopen, though disruptions may persist for months. A prolonged conflict, however, would significantly worsen the outlook, intensifying inflation, weakening currencies, and increasing the risk of fiscal instability across the continent.
