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Inflation Pressures Ease In Ghana And Egypt, As Rand Weakens

Nigerian Naira (₦) 

Compiled by Ikenga Kalu

The naira traded at 750 against the U.S. dollar on Wednesday, losing some ground from Friday’s closing price of 741. On the importers and exporters window, foreign exchange inflows dropped by 58.9% to a two-year low in the month of April from $1.49 billion in March. With the global economic growth slowing, the International Monetary Fund warned that Nigeria should expect a reduction in foreign loans and higher borrowing costs,  with a surge in the U.S. dollar continuing to strain the country’s economy, which is in line with other markets in Africa. With supply of forex falling short of demand, we project sustained pressure on the naira.

Further reading: – Foreign Loans Will Shrink, IMF Warns Nigeria – PUNCH – Forex Inflow On Investors’ & Exporters’ Window Drops To 2-Year Low – LEADERSHIP

Ghanaian Cedi (GH¢)

Compiled by Murega Mungai

The Ghanaian cedi climbed to a slightly stronger level of 11.75 USD/GHS this week from 11.80 at the close of last week as FX demand eased. Inflation slowed for a fourth consecutive month, falling to 41.2% in April, 2023 compared to 45% in March, 2023. The Bank of Ghana has urged commercial banks to cut lending rates to foster growth in the economy by lending more to the private sector. The country is still in the process of debt restructuring in order to secure a 3 billion U.S. dollar loan from the International Monetary Fund. In the coming days we project the rate will remain fairly stable.

Further reading: — Ghana inflation slows to 41.2% y/y in April: stats office — Falling inflation: BoG appeals to banks to cut lending rates

South African Rand (R)

Compiled by Alex Barmuta

The rand began the new week trading at 18.3570, marginally stronger against the U.S. dollar in comparison to last week’s close at 18.3811. The rand weakened significantly on Wednesday, crossing above the 18.50 resistance level with momentum.

The rand weakened significantly on Wednesday, crossing above the 18.50 resistance level with momentum as the 18.00-18.50 USD/ZAR range that has largely stayed intact since 21 February, finally gave way.
Investors were spooked on the back of news that rotational electricity supply cuts would remain at elevated levels, causing more economic growth concerns. This means that the rand is currently trading above 19 against the U.S. dollar – levels last seen at the height of the COVID-19 pandemic in April 2020.

From a global perspective, the U.S. dollar index continues to trade in the 100-102 range, indicating that the rand’s weakening beyond the 18.50 resistance level is driven by reduced ZAR demand, rather than a substantial increase in USD demand.

Looking ahead, we can expect the market to treat the 18.50 and 18.80 areas as the new support levels. Further weakness (beyond the USD/ZAR 19.00 level) remains a possibility, which would likely be driven by any increase in U.S. dollar demand.

Further reading:  

Financial Post – Blackouts Fuel Pandemic-Like Rout in South African Markets

Egyptian Pound (EGP)

Compiled by Mitchell Diedrick

The Egyptian pound traded at  30.9025 against the U.S. dollar on Wednesday March 10, 2023 and below last week’s close of 30.9558. 

Fitch Ratings downgraded Egypt’s sovereign credit rating by one notch to B from B+ and kept a negative outlook, citing rising external financing risks due to high funding needs and tightening external borrowing conditions. Fitch’s rating is now level with Standard & Poor’s, which is also at B with a negative outlook, while Moody’s has Egypt at B3 with a stable outlook

Egypt’s core inflation rate eased to 30.6% in April 2023. Costs slowed for housing and utilities as well as transport. Consumer prices rose 1.7% month-on-month, the lowest in seven months, after a 2.7% hike in the previous month. Our forecast is for the Egyptian pound to weaken beyond the 31.00 (USD/EGP) level in the short to medium term.

Further reading:  

Bloomberg – Egypt Gets First Fitch Downgrade Since 2013 as Economy Stumbles

The Guardian — Inflation, IMF austerity and grandiose military plans edge more Egyptians into poverty

Kenyan Shilling (KSh)

Compiled by Terry Karanja

The Kenyan shilling dropped this week to the levels of 136.65/85 USD/KES from last week’s 136.20/136.40 USD/KES as a result of increased forex demand from importers in the energy and manufacturing sectors combined with a slower supply of hard currency. Kenya is seeking an agreement on a Resilience and Sustainability Facility from the International Monetary Fund. IMF staff will visit the country to review the disbursement of $300 million as a long-term financing cushion to help economic resilience. The Foreign Exchange Reserves have dropped to $6,492 million an import cover of 3.61 months which is a drop from $6,508 million in the previous week. We expect the shilling will remain stable with the support of interbank trading .

Further reading:  

Bloomberg — IMF to Disburse $300 Million to Kenya After Review Completed

Ugandan Shilling (USh)

Compiled by Yadhav Panday

On Wednesday, May 10, 2023, the Ugandan shilling weakened by 0.35% to 3,712.00 per U.S. dollar from last week’s close. The Stanbic Bank Uganda PMI rose to 55.4 in April 2023, up from 53.2 the previous month, indicating the fastest expansion in private sector activity in 14 months amid improving demand conditions. Business activity increased for the ninth month in a row as new orders increased. Additionally, output increased in agriculture, construction, industry, services, and wholesale and retail. Employment increased in April, ending a two-month decline. Purchasing activity increased for the sixth month in a row while inventories continued to rise. Input costs increased further owing to rising fuel and utility prices, sustained purchase price inflation, and increased staff costs.

Overall, sentiment was positive about the outlook for the next 12 months, with hopes for continued output growth. Looking ahead, we expect the Ugandan shilling to remain relatively stable over the coming week.

Further reading:  

The Independent – Private sector output in continued expansion as PMI crosses 55.0 

Tanzanian Shilling (TSh)

Compiled by Kristin Van Helsdingen

​​The Tanzanian shilling has been weakening steadily for roughly a month and has hit its weakest level against the U.S. dollar since March 2019, trading at 2,355. Bid and offer rates for USD/TZS are currently at 2,352 and 2,362; in comparison to last week when these were trading at 2,345 and 2,355.

Provisional data released by the Bank of Tanzania indicates that the country’s main exports increased to $758.4 million for the year ending in March from $697.5 million in the previous year. The main contributing factor to this bump is an increase in prices. As the government continues to work with export industries to overcome hurdles and increase production, exports look set to increase further in the year ahead.

With little economic data being released from Tanzania this week, we expect the Tanzanian shilling to continue its trend and weaken further against the U.S. dollar in the week ahead, trading between 2,351 and 2,360.

Further reading:  

IPP MEDIA – Cash crop farmers’ earnings gain exports hit 7584mn

West African CFA Franc Region (XOF)

Compiled by Jean Cédric Nando KOUA 

Ivory Coast, Mali, Benin, and Togo raised XOF 135 billion on the securities market in the week of May 2.

Investors showed significant interest in these issues, with an average subscription rate of 157%. With an initial amount of XOF 125 billion sought, investors offered XOF 196 billion.

The securities market seems to have regained its dynamism after the various increases in the central bank’s key rate, enabling states to continue financing development.

Further reading:  

Sika finance — UMOA-Titres / Week of May 2: A surplus of 71 billion FCFA proposed to the States

Central African CFA Franc Region (XAF)

Compiled by Jean Cédric Nando KOUA

Cameroon has announced that it will pay XAF 14.6 billion on the “ECMR 6.25% NET 2022-2029” bond. This amount consists solely of interest payments, with principal repayments scheduled to begin in 2025.

This operation is mainly aimed at reinforcing investors’ confidence in order to increase their interest in the next issue of Cameroonian securities, estimated at XAF 200 billion and scheduled to be held in May. 

Further reading:  

Investir au Cameroun — Cameroon begins the repayment of its 2022 bond loan with a payment of XAF14.6 billion 



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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