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Nigeria’s Inflation Concerns Persist, South Africa’s Rand Under Pressure

Nigerian Naira (₦) 

Compiled by Ikenga Kalu

Over the week, the naira depreciated from USD/NGN 748 to USD/NGN 755 as at the latest closing price. The naira weakening beyond the 750 psychological resistance is testament to the spike in FX demand from importers. Inflation continues to trend upward and was recorded at an annual rate of 22.22% in April, up from 22.04% in March, despite multiple interest rate hikes by the Nigerian central bank. The continued upward trend in inflation is due to higher energy prices, fx rate volatility, and the recent nationwide cash crunch experienced as a result of the policy to replace naira notes . We expect the currency to continue to lose ground against the dollar in the coming days as more naira becomes available to support a pick-up in FX demand. 

Further reading:  

Nairametrics — Nigeria’s inflation rate rises to 22.22% in April 2023 as CBN rate hikes fail to work

Ghanaian Cedi (GH¢)

Compiled by Murega Mungai

The cedi rallied to USD/GHS 10.90 on May 17 from levels of USD/GHS 11.75 at the end of last week after  Finance Minister Mohammed Amin Adam disclosed that Ghana would receive $1.2 billion from the International Monetary Fund. Of this amount, $600 million will be disbursed within a week and subsequent tranches by December, subject to Ghana meeting certain conditions under the programme. The country is expected to receive about $3 billion from an extended credit facility arrangement within three years in its bailout. In the coming days, we project the cedi to remain fairly strong as the market reacts positively to the IMF deal. 

Further reading:  

Myjoyonline — Cedi gains more grounds, going for ¢11.30; Y-T-D loss is 8.7%
Reuters — Ghana expects first $600 mln tranche from IMF after Wednesday meeting – minister

South African Rand (R) 

Compiled by Alex Barmuta

The South African rand closed last week trading at 19.3265 against the U.S. dollar. On Monday the USD/ZAR attempted to recover some ground, however, it was unable to break below the 19.00 level. As of Wednesday, the rand continues to trade at around the 19.30 levels.

Allegations about South Africa sending arms from its Simon’s Town naval base to Russia triggered a rand sell-off, amid concerns about economic sanctions. While South Africa has denied the allegations, President Cyril Ramaphosa has launched an inquiry into the incident in question — which U.S. intelligence sources claim took place last December. Further pressure on the rand is driven by continued rotational power cuts, the release of retail sales figures showing that sales fell 1.6% year-on-year in March, and an increase in the unemployment rate in Q1 to 32.9%. It is worth noting that despite the overall increase in unemployment, the city of Cape Town’s unemployment rate fell from 30% to 26% year-on-year in March.

Looking ahead, we can expect high levels of volatility in rand pairs. Any news indicating a reduction in the tensions over the Russian arms incident could trigger some rand strength, leading the USD/ZAR to possibly break below the 19.00 level. On the other hand, if the allegations are proven to be correct and sanctions become a real possibility, we could see the rand move above the 19.50 level against the dollar, and possibly beyond.

Further reading:  

Business tech — The rand is at a tipping point

Egyptian Pound (EGP)

Compiled by Mitchell Diedrick

The Egyptian pound closed off last week marginally stronger against the U.S. dollar at 30.65 after averaging 30.84 in last week’s trade. It has returned to trading at weaker levels of USD/EGP 30.90 this week.
The government seems to be holding firm on its commitment to the IMF on privatization of state-owned entities evident by a partial sale of Telecom Egypt. On Sunday, May 14, 2023 the Egyptian Finance Ministry announced that a 9.5% stake in the company was sold to investors for approximately $122 million. Stakes in two additional state-owned entities are expected to sell before the end of the financial year in June, 2023. The move shows greater commitment to privatization and reform of the Egyptian economy. In the week ahead we expect the Egyptian pound to remain range bound between USD/EGP 30.95 and 30.80.

Further reading: 
Aljazeera – Government sells 9.5% of state-controlled Telecom Egypt

Kenyan Shilling (KSh)

Compiled by Terry Karanja

The Kenyan shilling continues to drop this week and hit a fresh record low of 136.95/137.60, down from last week’s close of 136.65/85, with inflation expected to elevate further.

Moody’s Investors Service downgraded Kenya’s long-term foreign currency and local currency issuer ratings to B3  from B2 and also lowered local and foreign currency country debt ceilings, citing increased liquidity risks faced by the Kenyan government. The ratings agency placed Kenya on review for further downgrade. The shilling could see some more pressure in the coming week, given increased FX demand from fuel importers relative to slower supply of hard currency in the country.

Further reading:  

The Kenyan Wall Street — Moody’s Places Kenya’s Government Ratings on Review for Downgrade

Ugandan Shilling (USh)

Compiled by Yadhav Panday

​​This Wednesday, May 17, 2023, the Ugandan shilling traded at USD/UGX 3,720, appreciating 0.05% from last week’s close against the dollar. Looking back, USD/UGX has gained 0.13% in the last four weeks. Its value has increased by 2.06% in the last year.  This was mainly influenced by Uganda keeping its key interest rate at 10% and the slow GDP rate. The Uganda National Oil Company (UNOC) and DGR Energy Turaco Uganda SMC have paid the Ministry of Energy $2 million in research expenses, as well as exploration costs and fees.

Looking ahead, we forecast the shilling to weaken against the dollar over the coming week. 

Further reading:  

Africa business insider –  Uganda’s Ministry of Energy earns $2 Million from latest oil block licenses 

Tanzanian Shilling (TSh)

Compiled by Kristin Van Helsdingen

The Tanzanian shilling continued its weakening trend,hitting its lowest level since 2019 at 2,356 last week. There was not much volatility between the currency pair this week as it traded between 2,354 and 2,356. This week, the USD/TZS mid-rate has weakened even further and has been trading around 2,357 and 2,358.

Store owners in Kariakoo, a business hub in Dar es Salaam, closed shop earlier this week and refused to reopen until the government addressed their grievances citing unfair monetary charges and seizure of their goods by tax authorities. Prime Minister Kassim Majaliwa took to the streets on Wednesday to drive an agreement with the business owners to encourage continuation of business.

As the government prepares for the 2023/24 fiscal year budget speech, Health Minister Ummy Mwalimu has requested that the health services’ budget be increased to 1.2 trillion Tanzanian shillings, from 1.1 trillion. 

In the week ahead, we expect the shilling to weaken and to head lower toward 2,360 against the dollar, but stopping short of this level. 

Further reading:  

Africa Press Health Ministry outlines budget priority areas

THE CITIZEN Sh1.67 trillion education budget to focus on five key areas

THE CITIZEN Businesses in Kariakoo count losses as traders stage protest

THE CITIZEN VIDEO: Kariakoo traders await to meet with Prime Minister

West African CFA Franc Region (XOF) 

Compiled by Jean Cédric Nando KOUA

Senegal has successfully raised XOF 38 billion on the securities market.

After Cote D’Ivoire, Mali, Benin and Togo, investors responded favorably to the Senegalese securities issue by offering up to XOF 59.83 billion against an initial amount of XOF 35 billion sought. The Senegalese treasury finally retained XOF 38 billion and offered investors a weighted average yield of 6.69% for the 1-year securities and 6.99% for the 3-year bonds. 

Further reading:  

Sika finance — UMOA: Senegal pockets 38 billion FCFA on the public securities market

Central African CFA Franc Region (XAF)

Compiled by Jean Cédric Nando KOUA

Last week the central bank proceeded with a liquidity takeover operation with the banks of the XAF region. The central bank formulated an offer to source XAF remunerated at 0.75% over seven days and was able to bring in to 100 billion.
After four successive increases in the key rate, the bank suspended the injection of liquidity into the market. This is part of the tightening of monetary policy initiated since December 2021 to help fight against inflation, which is expected to reach 6.4% for 2023 against an economic union target of 3%.

Further reading:  

Investir au Cameroun — The Beac densifies its operation to drain banks by increasing its weekly punctures to 100 billion FCFA


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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