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Nigerian spenders in lockdown bring false stability to Naira
Gloom over OPEC’s seeming inability to withstand further slumps in global oil prices left the Naira surprisingly unscathed, and even slightly appreciating in the parallel market to 410.5 per dollar from 412.5 last week. One reason is that, with Nigerians on lockdown, there is less demand for dollars both for consumer spending and production inputs. The corollary of this false stability is that an eventual return to normal business in Nigeria could actually drive the Naira to weaken as dollar demand picks up again.
Repo rate cut sinks Rand to new depths
The Rand depreciated a further 4% last week to 18.80 per dollar as South Africa further slashed interest rates in a bid to ease the economic toll from an extended lockdown. SARB cut the repo rate by 100 bps to 4.25%. South Africa has the continent’s highest tally of coronavirus infections. With the mining industry at a standstill, we see little prospect of dollar inflows and continued Rand weakening ahead.
Too rich for IMF relief, Kenya gets SDR cushion
Even though it missed out on the IMF’s debt service relief package (income at $1,710 per capita is above the threshold of $1,215 for qualifying nations), Kenya’s access to special drawing rights on foreign exchange reserves to cushion against external shocks were doubled to $700 million. This could assist with critical imports including medical supplies, oil, and fertilizers and is likely to support the Shilling in the near term. The currency remained stable last week, trading around 105.90 against the dollar.