Central Bank of Kenya reduces intervention to let shilling find its level, Cameroon raises funds to finance industrialization strategy

Nigerian Naira (₦) 

Compiled by Ikenga Kalu

The naira weakened against the U.S. dollar from USD/NGN 817 recorded last week to USD/NGN 846 by the latest trading day. Nigeria’s inflation rose to 22.79% in June from 22.41% recorded in May, according to the National Bureau of Statistics (NBS). This inflation spike was mostly driven by the food index, which increased to 25.25% in June compared to 24.82% in May. The Nigerian National Petroleum Company Limited (NNPCL) officially increased the price of petrol at the pump from NGN 537/liter to NGN 617/liter making it the second upward adjustment following the removal of the controversial fuel subsidy. This further increase in the cost of transportation is likely to push inflation even higher, which would further weaken the naira. In light of this, we expect to see more naira depreciation and a possible retest of the 860 resistance level, as previously seen in November 2022. 

Further reading:  

Reuters — (Nigeria inflation rises further in June, putting pressure on central bank

Punch — Marketers adjust pumps as fuel price hits N617/liter

Ghanaian Cedi (GH¢)

Compiled by Sakina Seidu

The cedi continued to appreciate after the upward jump a fortnight ago from USD/GHS 11.80 to USD/GHS 11.70 level. Presently, the cedi is around 11.60. Several factors affected this change, including the lower U.S. inflation rate for the month of June 2023.

Also, Ghana’s inflation went up marginally by 30 basis points to 42.50% in June 2023, indicating a slowing down of cost for goods and services. Other factors include the announcement of an increase in the country’s gold reserves; the government’s move toward restructuring the cocoa bills and bonds of domestic dollar bondholders; and the monetary policy committee (MPC) meeting coming up  July 19–21, 2023. These have impressed upon market participants that the Ghanaian economy is on the road to recovery.

Taking all these indicators into consideration, we posit that the cedi will continue to improve in performance against the U.S. dollar. 

Further reading:  

Ghana Business News — Ghana inflation for June rises to 42.5%

CNN Business — US inflation cooled in June for the 12th straight month

Ghana web — Restructuring cocoa bills: Local banks push for favorable terms

Ghana web — DDEP: Submit your old bonds for new ones – Government to domestic dollar bondholders

Ghana Business News — Bank of Ghana adds 7.70 tonnes to gold reserves

South African Rand (R) 

Compiled by Alex Barmuta

The USD/ZAR closed last week trading at 18.0903. The new week saw the rand continue strengthening against the dollar. As of Wednesday afternoon, the USD/ZAR is trading at 17.90. 

 The USD/ZAR’s move under the 18.00 was somewhat expected, as inflation data released in the U.S. last week showed that there may not be more than 1 rate hike for the USD in 2023.
Looking at the local front, inflation data released by Statistics South Africa showed that inflation has slowed to 5.4% year-on-year in June, indicating that we could possibly see a pause in rate hikes from the Monetary Policy Committee (MPC) at the upcoming interest rate decision.
Going into the new week, we can expect the USD/ZAR to continue to trade around the 18.00 level. A move toward 17.70 is possible if there is a renewed bout of U.S. dollar weakness. 

Further reading:  

Marketscreener — South Africa’s Annual Inflation Slows to 5.4% in June

Egyptian Pound (EGP)

Compiled by Mitchell Diedrick

The Egyptian pound continued to trade around USD/EGP 30.90 on Wednesday, July 19, 2023, as has been observed over the past few weeks. This week the Central Bank of Egypt (CBE) and the Central Bank of Nigeria (CBN) signed a memorandum of understanding to establish a Nigeria-Egypt FinTech Bridge. The purpose of this partnership would be to improve payment systems, financial inclusion, and economic growth opportunities in the region. 

In the week ahead, we expect USD/EGP to remain below 30.95 in the absence of any fundamental shocks.

Further reading:  

Vanguard – CBN, Egyptian Central Bank seal FinTech deal

Kenyan Shilling (KSh)

Compiled by Terry Karanja

The Kenyan shilling is currently trading at USD/KES 141.50/142.23, which is slightly weaker than last week’s levels. The Central Bank of Kenya (CBK) has reduced its intervention in the forex rate market so as to let the shilling find its level suggesting a weakening of the shilling is not representative of excess volatility. The CBK expects the slowdown in U.S. monetary policy tightening will ease pressure on the shilling. The CBK Governor, Dr. Kamau Thugge, reported that the spread between the CBK rate and the retail rate has reduced and expects the reserves to remain above four months of import cover in the short run, strengthening the bank’s buffers against any potential volatility in the exchange rate. As of July 13, the usable forex reserves remained adequate at $7,481 million, equivalent to 4.09 months of import cover. Also, the IMF approved almost $1 billion U.S. dollars for Kenya to help the country reduce debt vulnerabilities, tackle climate change, and to revive the economy, and boost the foreign exchange reserves.

We expect the shilling to continue coming under pressure due to the increased dollar demand from importers and reduced dollar inflows. Diaspora inflows dropped by 6.1% in June to Sh49 billion from Sh49.9 billion in May.

Further reading

Business daily — CBK avoids interventions to prop up Kenya shilling
The Herald — IMF approves US $1bn for Kenya

Ugandan Shilling (USh)

Compiled by Yadhav Panday

This Wednesday, July 19, 2023, USD/UGX traded at 3,660.00, weakened by 0.12% from last Friday. Looking ahead, we expect USD/UGX to fall in the coming week as Uganda formally adopted a roadmap to increase the Productive Use of Renewable Energy (PURE) in the country.

The roadmap includes a market assessment with an in-depth analysis of the challenges and opportunities that are possible with adopting a greener energy platform. The roadmap, which is aligned with national government goals, shares country-specific action plans for scaling PURE.

Further reading:  

ESI AFRICA – Productive use of renewable energy roadmap for Uganda 

Tanzanian Shilling (TSh)

Compiled by Kristin Van Helsdingen

The Tanzanian shilling remained stable last week and closed the week off at USD/TZS 2,444. The shilling indicated significant strength on Monday when it was trading at USD/TZS 2,433 but has since returned to USD/TZS 2,444. This is the first full week in roughly three months where the shilling hasn’t weakened against the dollar.

The Governor of the Bank of Tanzania (BoT), Emmanuel Tutuba, stated on Monday, July 17, 2023, that they have enough foreign reserves to cover up to five months of the forecasted imports, which is comfortably above their goal of having at least four months’ worth. Additionally, the BoT is looking to lower the capital requirements for bureaux de change services as well as allow major hotels to offer forex to foreign visitors.

On Tuesday, it was confirmed that the Tanzanian government owes Indiana Resources, an Australian-based firm, $109 million U.S. Dollars with regard to a World Bank dispute.

The BoT has been very active in the Tanzanian market this past week, so we expect the Tanzanian shilling to remain relatively stable, trading at USD/TZS 2,444 as they continue to maintain the value of the currency.

Further reading:  

allAfrica – Tanzania: BoT – Forex Reserve Climbs Up

THE CITIZEN – What BoT is doing to boost forex services

The Market Herald – Indiana Resources (ASX:IDA) wins $160M from Tanzania in World Bank dispute

West African CFA Franc Region (XOF)

Compiled by Jean Cédric Nando KOUA 

This July 15, 2023, during the SME forum, Senegal unveiled its ambitions for the financing of SMEs.

The outstanding credit granted to these companies amounts to 500 billion XOF for 500,000 beneficiaries in 2023, and Senegal aims to reach 3,000 billion XOF for 1.2 million beneficiaries in 2028.

To achieve these objectives, a project of 10 reforms will be launched and will mainly focus on the legal system, guarantee mechanisms, adaptation of taxation, etc. It will significantly improve the competitiveness of SMEs, which represent the largest part of the economic landscape. 

Further reading:  

Sika finance – Senegal wants to multiply by 5 the volume of loans granted to SMEs by 2028

Central African CFA Franc Region (XAF)

Compiled by Jean Cédric Nando KOUA 

Cameroon has raised XAF 41.3 billion from the African Development Bank (AfDB) to finance its industrialization strategy.

This strategy is implemented through the support project for the promotion of entrepreneurship and the improvement of skills in support of industrialization.

The objective of this project is to develop the skills necessary for the economic needs of the country, and to promote the employment and entrepreneurship of young people and women in the sectors of construction, agro-industry, energy, etc.

Through the establishment of twelve training centers and nine incubators, this project will have a significant impact on the economic development of Cameroon by creating 28,000 jobs by 2050. 

Further reading:  

Sika finance – Cameroon: 63 million euros from the AfDB to develop entrepreneurship and skills in industry


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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