African banks increasingly worried about funding costs, survey shows

Sub-Saharan African banks are increasingly worried about funding costs, an annual survey published on Wednesday found, as soaring interest rates both on the continent and globally make financing more expensive.

The cost of local currency funding was now the top worry for Sub-Saharan Africa’s banks, according to a survey by the European Investment Bank of 70 institutions that account for 30% of the African continent’s assets.

Central banks from Nigeria to Kenya, Ghana and South Africa have aggressively raised interest rates in a bid to tame inflation and give some support to currencies that have been hammered by the US dollar this year.

“The main concerns for banks are the cost of local currency funding, competition from the non-banking sector and deteriorating asset quality,” the EIB’s report said.

Banks were surveyed between April and June, meaning that the impact of the war in Ukraine had already begun to shape perceptions.