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Nigeria deploys trillion-Naira bazooka
As we predicted here last Monday, the Naira recouped some of its losses and appreciated 1.4% against the dollar for the week. However, the pressure is mounting again with Covid-19 closing the country’s borders and driving up food prices. New data showed annual [CHK] inflation started to pick up in February to 12.20% from 12.13% a month earlier, with further acceleration likely. The need to diversify the economy away from oil has become more urgent with crude prices sinking to as low as $24 per barrel. As a response, the CBN has announced a 1 trillion Naira ($2.7 billion) stimulus to boost credit growth in manufacturing, agriculture and services sectors plus an additional (CHK) 100 billion Naira to support the health sector.
Rand relief proves brief ahead of Moody’s ‘junk’ call, Covid-19 lockdown
Relief for the Rand after the South African Reserve Bank resistance to cut rates proved short-lived, with the currency ending the week down 5% at 17.50 to the dollar. With the nation in lockdown amid the highest Covid-19 infection rate in sub-Saharan Africa, further pressure is expected from Moody’s long-awaited decision on its threat to downgrade South Africa’s bonds to junk status. There seems to be little hope for reprieve as Moody’s had halved its projection for South Africa’s 2020 economic growth even before coronavirus entered the country. As one of the most liquid currencies in emerging markets, the Rand will continue to be a prime casualty of the flight from riskier assets, coupled with plenty of domestic reasons to sell.
Shilling under pressure as businesses and remittances take hit
Eleven more cases (CHK) of coronavirus and a government advisory to restrain from public gatherings discouraged movement and shut businesses across Kenya. The economy is being hit by declining revenue from exports and reduced diaspora remittances and with the travel ban announced yesterday, we expect the economy to aggravate further. After dropping 2.9% against the dollar last week, in line with a similar move for the Ugandan shilling, we see further declines from current levels.
For more insights on how COVID-19 will affect African economies and what steps businesses can take to mitigate them, join our webinar on March 25th at 1 PM GMT. Register now: http://bit.ly/2x601g2
