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Boosts In Ugandan Shilling And The Ghanaian Cedi

Nigerian Naira (₦) 

The naira appreciated marginally from $/NGN 746 to $/NGN 745 in the previous week’s trading. However, inflation continues to hurt, with the lowest-paid workers seeing the purchasing power of their wages eroded by around 40% in three years. Since the minimum wage was set at NGN 30,000 in 2019, inflation has climbed from 11.4% in 2019 to 21.91% in February this year. According to the latest purchasing manager’s report (PMI report), the ongoing scarcity of naira notes is causing a slowdown in business activity as there have been reports that customers are unmotivated to spend their naira bills due to the ongoing cash crunch at the banks. The monthly PMI has declined from 44.7 in February to 42.3 in March. We expect a gradual depreciation of the naira conceptual circulation of bills has been restored, as this would prompt a resumption of FX purchases for imports and general speculation. 


Further reading:  

Business Day: Inflation erodes Nigeria’s minimum wage by 41% in 3 years
Business Day: Nigeria’s business activity contracts for the second straight month

Ghanaian Cedi (GH¢)

The Ghanaian cedi gained from trading at 11.80 as at the close of last week to trade at 10.75 this week. This was supported by an increase in FX liquidity in the market as the Bank of Ghana intervened with $3m in the spot market and $20m for bulk oil distribution companies. Positive sentiment regarding the progress on the debt restructuring program also helped support the cedi. Meanwhile, the World Bank lowered Ghana’s growth rate to below 2% for 2023 compared to 2.7% previously projected due to the overall decline in economic stability. In the coming days, we project the cedi to remain stronger.


Further reading:  

Myjoy Online: Cedi gained 3.11% in value against dollar last week

Myjoy Online: World Bank lowers Ghana’s growth rate to below 2% in 2023

South African Rand (R)

The rand started the new week on the front foot – opening at 17.7682, well beyond the 18.00 level against the USD. But momentum seems to have shifted once more, as the rand struggles to stay ahead of the psychological USD/ZAR 18.00 mark. From a local perspective, the change was driven by suboptimal PMI figures released on Wednesday. The data showed that the index dropped to 49.7 in March, down from 50.50 in February. This can be largely attributed to inflationary pressures and the increase in rotational power cuts that South Africa has been experiencing so far in 2023 as Eskom’s challenges continue. Looking at the global panorama, the U.S. dollar remains on the back foot, as the USD index continues to hover just below 102, with traders weighing in on the possibility of no rate hike in May. Continued U.S. dollar weakness could see the ZAR test 17.60-17.70 levels,  while a deterioration in global risk sentiment could drive new demand for the dollar, pushing the rand well above 18.


Further reading:  

Reuters: South African business activity contracts in March – PMI

Yahoo Finance: Fed’s Mester says too soon to tell if May rate hike needed

Egyptian Pound (EGP)

The Egyptian pound remained range-bound over the last week, grasping firmly at the 30.89 level. The 2 percentage points rise in interest rates announced by the central bank last week may have helped to maintain the pound’s stability in the short term. The overnight deposit rate increased to 18.25%, and the overnight lending rate rose to 19.25%. Most signs point to further pound depreciation in the coming months with continued inflationary pressure. The Egyptian pound was named by CNBC as one of the lowest-performing currencies against the dollar this year. Our forecast is for the pound to surpass the 31.00 (USD/EGP) level in the short to medium term. 


Further reading:  

Reuters: Egypt’s central bank raises interest rates by 200 bps to tame inflation

Kenyan Shilling (KSh)

The Kenyan shilling traded weaker this week, from 132.49 at the close of last week to 133.39 this week. This follows market demand growth, even after the revival of the interbank foreign exchange trades, which smoothed high volatility. Inflation in March remained at 9.2%; the monetary policy committee raised the central bank rate to 9.5% in last week’s meeting. Going forward, we may see an easing in pressure on the shilling, supported by global factors as well as the effects of monetary policy tightening.


Further reading:  

Reuters: Kenya private sector activity in March; weaker shilling hurts Kenya raises rates to highest since 2018

Ugandan Shilling (USh)

On Wednesday, April 5th, the U.S. dollar/Ugandan shilling pair traded at 3,755.00, down 0.40 percent from the previous trading session. The Stanbic Bank Uganda PMI increased to 53.2 in March 2023, up from 51.2 the previous month, indicating an improvement in business activity, as increased output and new orders were sustained for the eighth consecutive month. Agriculture, construction, industry, services, wholesale, and retail all saw increased business activity. Input prices advanced for the twentieth consecutive month, owing primarily to higher purchase costs and higher prices for utilities and construction materials. Despite a further increase in input costs, selling prices fell. Looking ahead, we anticipate that the U.S. dollar/Ugandan shilling will strengthen by the end of this week but may weaken in a year.


Further reading:  

The Independent: Stanbic shareholders to get Shs235bn as profits surge to record high

Tanzanian Shilling (TSh)

The Tanzanian shilling traded between 2,338 and 2,341 against the dollar this past week. This stability against supports the idea that the shilling has support from the Central Bank of Tanzania as the true value of the dollar weakened to a 2-month low on Tuesday due to poor economic data released from the U.S. Bid and offer rates are currently at 2,336 and 2,345, respectively. The government has begun preparing for the budget speech scheduled for June 15. The full budget the officials have to work with is 44.3 trillion Tanzanian shillings. In the week ahead, we expect the shilling to remain stable, trading between 2,336 and 2,342. With fuel prices falling marginally this week, consumers will have some relief in the month ahead while officials start planning for the new financial year.


Further reading:  

Reuters: U.S. dollar slumps after weak data; markets betting Fed near end of hiking cycle

Africa Press: Marathon budget session kicks off today

Africa Press: Relief for motorists as fuel prices drop

West African CFA Franc Region (XOF) 

Senegal and the African Development Bank have signed a 41 billion XOF partnership financing two major projects. The first concerns strengthening food resilience in the Sahel and will promote development of value chains. The second concerns the establishment of an infrastructure network and logistics hub to boost industrial production. 


Further reading:  

Sika Finance: 41 milliards FCFA de la BOAD pour améliorer les conditions de vie des populations

Central African CFA Franc Region (XAF)

After the end of drilling works announced by the Norwegian oil company BW Energy, use of the Hibiscus oil well should start this April and produce approximately 30,000 barrels per day, thus reinforcing gross oil production estimated at 70 million barrels in 2022. A project to build a liquefied natural gas (LNG) production unit estimated at XAF 614 billion initiated in February will boost prospects for economic growth.


Further reading:  

Sika Finance: Le champ pétrolier Hibiscus entrera bientôt en production

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.

AZA Finance



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