The World Bank has revised its economic growth forecast for Sub-Saharan Africa in 2026 downward to 4.1 per cent, citing mounting debt, rising fuel and fertilizer costs, and fallout from the ongoing Middle East conflict as key risks. The new projection, released Wednesday, marks a decline from the 4.4 per cent forecast in October and indicates growth will remain flat compared to 2025.

According to Andrew Dabalen, World Bank chief economist for Africa, the forecast reflects a more challenging external environment than anticipated. Energy and fertilizer price spikes following the Iran conflict, alongside uncertain investment flows from Gulf countries, have placed additional strain on African economies.

The report warns that remittance inflows, a critical lifeline for millions of African households, may also be affected if Middle East labour demand weakens. The potential slowdown in these transfers could further limit consumption and economic stability.

Debt pressures across the region remain severe. Debt-servicing costs have nearly doubled over the past decade, rising from 9 per cent of government revenues in 2017 to roughly 18 per cent in 2025. Nearly half of Sub-Saharan countries are now classified as either at high risk of debt distress or already experiencing it, leaving governments with limited capacity to respond to new shocks.

The report highlights particular vulnerability in oil-importing and financially fragile economies, including Burundi, Malawi, Ethiopia, Kenya, and Mozambique. For instance, Kenya may face significant inflationary pressures, while Ethiopia is exposed due to its large workforce in Saudi Arabia and other Middle Eastern countries.

While West Africa appears relatively less affected, Dabalen cautioned that incomplete fertilizer data for the sub-region may mask emerging risks.

The World Bank’s assessment underscores Sub-Saharan Africa’s heightened susceptibility to global shocks, warning that geopolitical tensions, commodity price fluctuations, and structural debt challenges continue to weigh heavily on economic recovery prospects.

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Kenya’s annual inflation rate eased to 4.3 per cent in February 2026, down slightly from 4.4 per cent recorded in January, according to new data released by the Kenya National Bureau of Statistics (KNBS).

The marginal decline in price growth provides additional room for the Central Bank of Kenya (CBK) to consider further interest rate reductions as it seeks to balance inflation control with economic growth.

The figures were published in the KNBS Consumer Price Index (CPI) and Inflation Report on Friday.

Inflation Remains Within Target Range

The latest data shows that the general price level in February 2026 was 4.3 per cent higher than in February 2025, reflecting a continued moderation in price pressures across key sectors of the economy.

Kenya’s inflation rate remains comfortably within the CBK’s target range of 2.5 to 7.5 per cent. The central bank has consistently maintained that keeping inflation within this band supports price stability while fostering sustainable economic expansion.

Since August 2024, the CBK has reduced borrowing costs in 10 consecutive Monetary Policy Committee (MPC) meetings, citing subdued inflation and the need to stimulate lending and private sector activity.

Food Prices Drive Annual Inflation

According to the KNBS report, prices in the Food and Non-Alcoholic Beverages category rose by 7.3 per cent year-on-year in February, remaining the largest contributor to headline inflation.

Transport costs increased by 4.0 per cent, while Housing, Water, Electricity, Gas, and other fuels recorded a 1.8 per cent annual rise.

Together, these three divisions account for more than 57 per cent of the total weight across the 13 major expenditure categories used to compute the CPI, underscoring their significant influence on overall inflation trends.

Mixed Monthly Food Price Movements

On a month-on-month basis, selected food commodities recorded mixed price movements between January and February 2026.

KNBS reported that the price of sugar declined from KSh 174.17 to KSh 166.56 per kilogramme. Mangoes also recorded a drop, falling from KSh 149.09 to KSh 144.37 per kilogramme, while tomato prices edged down slightly from KSh 87.98 to KSh 87.90 per kilogramme.

The moderation in prices of key food staples helped offset increases in other items, contributing to the overall easing of inflation during the month under review.

Core Inflation Falls to 2.1%

Core inflation — which excludes volatile components such as fresh food and fuel — also declined, easing to 2.1 per cent in February.

This measure tracks underlying price pressures in areas such as manufactured food products, healthcare services, education and information and communication technology (ICT).

The steady decline in core inflation signals subdued underlying demand pressures in the economy, suggesting that recent monetary policy adjustments have not triggered excessive price increases.

Economists often monitor core inflation closely as it provides a clearer picture of long-term price trends, stripped of short-term volatility caused by seasonal food supply fluctuations or global energy price shocks.

Implications for Monetary Policy

The continued moderation in both headline and core inflation strengthens the case for further monetary easing by the Central Bank of Kenya.

Lower inflation provides policymakers with flexibility to either maintain current rates or implement additional cuts to support credit growth and broader economic activity.

With inflation holding below the 5 per cent mark for several months, analysts say the CBK may prioritise stimulating investment and consumption, particularly as global economic conditions remain uncertain.

Regional Comparison

Kenya’s latest inflation reading aligns with a broader trend of easing price pressures across parts of Africa.

In South Africa, annual inflation slowed to 3.5 per cent in January, reflecting similar moderation in food and fuel costs.

Meanwhile, Nigeria also recorded a slight improvement in January, with headline inflation easing to 15.10 per cent from 15.15 per cent in December, according to data from the country’s statistics office.

In response to easing price pressures, the Central Bank of Nigeria (CBN) reduced its Monetary Policy Rate by 50 basis points to 26.5 per cent in February 2026.

Outlook

The latest CPI report suggests that Kenya is experiencing manageable inflation levels, supported by moderating food prices and contained underlying demand pressures.

If current trends persist, the Central Bank of Kenya may have additional scope to ease policy further in the coming months, reinforcing efforts to stimulate economic growth while maintaining price stability.

However, analysts caution that inflation risks remain, particularly from potential global commodity price volatility, exchange rate pressures or adverse weather conditions that could disrupt food supply.

For now, February’s data offers policymakers reassurance that inflation remains under control — providing a measured opportunity to support economic momentum without undermining price stability.

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Nigeria’s Net Domestic Credit (NDC) fell by 12.8 percent year-on-year to N98.97 trillion in August 2025, according to the Central Bank of Nigeria’s latest money and credit report. The decline, analysts say, mirrors the Central Bank’s monetary policy easing measures as inflation continues to moderate.

A breakdown shows that in August 2025, bank credit to government stood at N23.13 billion, while credit to the private sector amounted to N75.84 billion. This compares to August 2024 figures of N39.39 billion to government and N74.07 billion to the private sector, which brought total NDC to N113.46 trillion.

On a monthly trend, NDC was N102.41 billion in January 2025 and rose slightly by 0.9 percent to N103.37 billion in February, before falling sharply by 34 percent to N68.18 billion in March. It rebounded by 49.6 percent to N102 billion in April, dipped by 1.03 percent in May, and dropped further by 3.13 percent in June. Though July data was unavailable, August saw a mild 1.2 percent recovery.

Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), commended the Central Bank’s Monetary Policy Committee for cutting the Monetary Policy Rate (MPR), describing it as “a welcome and timely intervention.” He noted that a lower MPR, alongside reduced Cash Reserve Requirements, should expand banks’ lending capacity, ease borrowing costs, and stimulate business growth and job creation.

However, Yusuf cautioned that fiscal support remains crucial. “Monetary easing alone is not enough. Fiscal authorities must prioritize infrastructure, strengthen regulation, and sustain fiscal discipline to ensure macroeconomic stability and investor confidence,” he said.

David Adonri, Executive Vice Chairman at High Cap Securities Limited, warned that the ongoing contraction in credit could further strain businesses already battling inflation, forex volatility, and weak consumer demand. He noted that Nigeria’s policy move aligns with a wider African trend, with countries like Ghana and Kenya also cutting interest rates as inflation cools.

Despite these regional shifts, Nigeria’s MPR remains among the highest in Africa, reflecting persistent inflationary pressures and cautious monetary management.

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