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Bank of Ghana Blames Debt Exchange Program For Huge Losses

Nigerian Naira (₦) 

Compiled by Ikenga Kalu

The naira continued its depreciating streak falling from USD/NGN 885 to the USD/NGN 900 trading band for the first time. Manufacturers in the textile industry are reeling under the impact of the exchange rate harmonization on the price of gas which is quoted in U.S. dollars. The naira devaluation which saw the official exchange rate move from N463.38/$ to N775.76 has essentially doubled the price of gas and is causing the manufacturers to consider either scaling down or shutting operations altogether. We expect to see continued depreciation of the naira as increasing demand continues to pile pressure on tight FX supply. 

Further reading:  

BusinessDay — Textile mills under strain as gas to power cost doubles

Ghanaian Cedi (GH¢)

Compiled by Sakina Seidu

Cedi held steady this week, appreciating against the dollar, hitting a price ceiling of USD/GHS 11.15, and a floor of USD/GHS 11.50. The domestic debt exchange programme (DDEP) has been a major determinant of losses recorded by commercial banks for the year 2022. It, however, came as a surprise when the central bank showed in its financial statement a whopping GHS 60.81 billion loss for the year ended 2022. The Bank of Ghana attributes this loss mainly to the DDEP. 

Bank directors say they have put measures in place to restore the balance sheet despite the lender of last resort recording this huge loss. Additionally, the Bank of Ghana’s Director of Research, Dr. Philip Abradu-Otoo, assured Ghanaians that the financing of the government had been suspended since January 2023 and is expected to continue for the next three years. This is one of the strategies to get the central bank back to profitability.

We expect the cedi to lose some traction on its five-week rally against the dollar as inflation increased by 60 basis points to 43.10%. 

Further reading:  

Joy Online — Cedi to remain stable this week; going for ¢11.50 to a dollar 

Citi Business News — BoG posts GH¢60.81bn losses in 2022

Bank of Ghana Annual Report 2022

Joy Online — We are strictly enforcing our zero financing policy – BoG

Joy Online — Inflation increases marginally to 43.1% in July 2023

South African Rand (R) 

Compiled by Alex Barmuta

Last week we saw the USD/ZAR rate close at 18.4378. By Wednesday afternoon, the USD/ZAR rate had moved back toward the 19 level. Recent Chinese data showed that Imports and exports from China fell more than expected signaling weakening global demand, leading to a sharp depreciation of the rand on Tuesday, as it lost 1.6%. This, in turn, led to additional ZAR selling pressure. Looking at the week ahead, we can expect the rand to continue trading between the 18.80 – 19.20 levels against the U.S. dollar.

Further reading: — Pound To Rand News, Outlook: GBP Rate Climbs Amid ZAR Selling Pressure

Egyptian Pound (EGP)

Compiled by Mitchell Diedrick

The Egyptian pound traded around USD/EGP 30.90 in midweek trading, near the level of Friday’s market close.

The Central Bank of Egypt raised interest rates on Aug. 3, 2023, in reaction to persistently high inflation. The monetary policy committee announced the lending rate was increased to 20.25% and the deposit rate increased to 19.25%.

Egyptians are also facing electricity supply cuts nationwide on a rationing basis, hampering productivity. This is expected to last until September, and reduced economic growth is anticipated if this persists in the long term. A similar case can be observed in South Africa.

We do not anticipate any significant movements for the pound in the coming week. 

Further reading:  

Reuters – Egypt’s central bank raises interest rates by 100 basis points

Kenyan Shilling (KSh)

Compiled by Terry Karanja

The Kenyan shilling depreciated this week and is currently trading at USD/KES 143.20/143.50 from last week’s levels of 142.02/142.80 due to the dollar shortage with high demand from importers. President William Ruto said that his government has moved away from borrowing to finance the budget of the current fiscal year and focused on funding the budget through taxes imposed on Kenyans. He said he would hold back from borrowing from expensive sources in favor of cheaper sources like the World Bank. The Kenya Development Corporation will receive Sh20 billion from the World Bank under a new agreement with the targeted sectors being pastoralists, job transformation, and entrepreneurship. The shilling may continue to be under pressure in the coming week with high dollar demand from oil importers and the manufacturing sectors.

Further reading:  

Capital Business — World Bank Lines Up Sh20 Billion For Kenya’s Pastoralists, Job Transformation And Entrepreneurship Projects

The Standard – New taxes to transform our country, says Ruto

Ugandan Shilling (USh)

Compiled by Yadhav Panday

The Ugandan shilling depreciated further this week and traded above the USD/UGX 3640 level on Wednesday after closing around USD/UGX 3611 on Friday.

Airtel Africa PLC has announced that an IPO is planned for their Ugandan-based subsidiary, Airtel Uganda Ltd, to list on the main investment market segment of the Uganda Securities Exchange. The offering is aimed at boosting local ownership of the telecommunications company, as preference would be given to local investors.

Further depreciation of the shilling is likely in the coming week as the World Bank has halted further funding following Uganda’s Anti-Homosexuality Act that was passed earlier in the month as it’s in contradiction to their values. The World Bank has deployed a team to Uganda, and the matter is under discussion with the authorities. 

Further reading:  

Reuters – Uganda to reopen century-old rail link after China fails to fund new line

Tanzanian Shilling (TSh)

Compiled by Kristin Van Helsdingen

The Tanzanian shilling weakened against the U.S. dollar at the end of last week, with USD/TZS increasing to 2,495, its highest level since 2017. At the start of the week, the shilling gained some strength but has since weakened and is currently back trading at USD/TZS 2,496.

High fuel prices have dampened business locally. Additionally, while the strengthening of the dollar is good for exports, it’s making imports more expensive. The Bank of Tanzania has confirmed that they are taking steps to address the situation.

The Tanzanian shilling is expected to strengthen against the U.S. dollar in the week ahead as the central bank works toward gaining control over the value of the shilling.

Further reading:  

The Citizen – What BoT is doing to address dollar’s impact on fuel business

The Citizen – Tanzania to feel pinch of US monetary policy

West African CFA Franc Region (XOF) 

Compiled by Yashveer Singh

West African leaders are set to convene to address the situation in Niger after coup leaders who took control on July 26, 2023, refused to comply with a deadline from the regional bloc, the Economic Community of West African States (ECOWAS). The deadline demanded the reinstatement of the deposed president or else face potential military intervention. The coup leaders opted to close Niger’s airspace and vowed to protect the nation instead. This situation could exacerbate existing challenges in the region, such as a hunger crisis and the presence of armed groups causing significant casualties and displacements. The outcome could lead to further instability in one of the world’s poorest regions.

Further reading:  

Aljazeera — ECOWAS calls for second emergency summit to discuss Niger coup

Central African CFA Franc Region (XAF)

Compiled by Yashveer Singh

In the second quarter of 2023, the price of exported commodities from Central African Economic Monetary Community (CEMAC) countries decreased by 1.7%, as indicated by the composite commodity index released by the Bank of Central African States (BEAC). This decline was mainly driven by a drop in natural gas and oil prices, which are key export products for the region. The prices of energy products specifically saw a 6.7% decrease, a slower decline compared to the previous quarter’s 17.9% drop, contributing to the overall deterioration of the index. Energy product prices increased by 5.9%, while non-energy product prices rose by 5.4%, lower than the previous quarter’s 6.3%. Agricultural products saw the highest increase at 8.3%, followed by forestry products at 2.6% and fishery products at 1.7%. However, prices of metals and minerals decreased by 2%.

Compared with the first quarter of 2023, The decline in prices of products exported by CEMAC countries is less severe when compared with the first quarter of 2023, with a 10% contraction previously. The central bank also notes that despite a continuous decline since late 2022, the prices of main raw materials exported by CEMAC countries are still higher than their levels before the pandemic.

 Further reading:  

Businessincameroon — CEMAC: oil and gas lowered export commodity prices in Q2’2023 (BEAC)


Issued by AZA Finance, this Newsletter is produced as a service to our clients. It is prepared by our dealing professionals and is based on their understanding and interpretation of market events. AZA Finance cannot be held responsible for any losses of whatever nature sustained as a result of action taken based on comments contained in this publication.

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