Menu

Surprise rate cut and second wave worries hit Naira, Rand while reopenings pressure the Shillings

Funding in the COVID era


At a time when companies need funding more than ever, policy responses to coronavirus are opening up new finance sources while central bank stimulus is driving interest costs ever lower. How can companies tap into this stream? We will be unraveling the changes in development financing and exploring the best ways to approach public, private, and blended finance sources in a special webinar this Wednesday, September 30.

Click on the image to join us.

AZA Webinar: Funding in the COVID-19 Era

Surprise rate cut hammers Naira

The Naira came under more pressure in the parallel market, trading as low as 467 to the dollar, after the CBN cut the interest rates by 100bps to 11.5% in a surprise move aimed at spurring recovery from the crash in oil prices earlier in the year and the effects of coronavirus. A memo shared with banks pointing to the increasing scarcity of dollars in the market indicates the potential for fresh restrictions to curb FX purchases, as sales by Bureau de Change’s are clearly inadequate to meet demand. With such restrictions looming, we expect the Naira to bottom and some stability in the near term.

Second wave worries knock Rand

The Rand wiped out its recent gains, touching a low of 17.10 to the dollar, amid renewed fears of a second wave of coronavirus infections and looming lockdowns in Europe. South Africa, with the continent’s highest infection rate, has suffered deep and rapid deterioration to its economy. With rising debt levels limiting the ability of the government and South African Reserve Bank to enact further stimulus measures to counter rising unemployment, we expect more pressure on the currency in the medium term.

Shilling steady for now as Kenya mulls reopening

The Kenyan Shilling stayed relatively stable against the dollar at 108.5 levels as a flattening in the rate of coronavirus infections prompted proposals to reopen the country. The President directed the National Emergency Response on Coronavirus to review the country’s status and report back next Tuesday. Plans include the reopening of schools from Oct. 19. Last Friday, the Treasury raised the domestic borrowing target by 6% (Sh29.72 billion) to Sh524.69 billion for the current financial year to make up for a 15.03% decline in tax collection in the first two months. With increasing dollar demand from importers, and dollar supply still limited in the tourist sector and core exports, we expect more pressure on the Shilling this coming week.

Uganda reopening spells pressure for Shilling

The Ugandan Shilling strengthened during the week to trade at 3685/3695 levels against the dollar amid low FX demand from importers and manufacturers. We foresee dollar demand from importers increasing, however, after President Museveni’s announcement to reopen the country’s borders for tourists in an effort to stem the economy’s downturn. Bans on meetings in places of worship, schools and transportation were lifted.

Coffee and cashews calm Tanzanian Shilling

The Tanzanian shilling traded unchanged from a week ago at 2315/2325 (2320). Preparations for the general election on Oct. 28 won praise as “the best on exercising democracy through the election process” from Norway’s Ambassador to Tanzania. Norway gave 7 million dollars to be spent on fighting poverty through the Tanzania Social Action Fund. With such official inflows along with revenue from coffee, cashew nuts, and other agricultural exports, we anticipate a stable shilling in the near term.

Follow us on Twitter at @aza_africa for more currency insights!

Related to this article

4_things_you_should_know_when_managing_payroll_payments_in_Africa
Resources
4 Things You Should Know When Managing Payroll Payments in Africa

Whether you’re a payroll provider, or a freelancing company in or venturing

2 Minute
Fatimah_Gana_Mahmou_Head_of_Sales_for_West_Central_Africa_AZA_Finance_fintech_fuel_Uganda
Events
Fintech Fuel Uganda: Improving Efficiency in Cross-Border Payments

The AZA Finance breakfast networking event “FinTech Fuel Uganda” recently brought together

2 Minute
What_it means_to_be_an_Africa_first_b2b_fintech_AZA_Finance
Company announcements
What it means to be an Africa-first b2b fintech

For the past ten years, we’ve been laser-focused on helping businesses across

2 Minute
Company Culture
Circle And AZA Finance Issue Paper

About the white paper AZA Finance, a pan-African fintech company, and Circle,

3 Minute Read-Time

News & Updates

Subscribe now to our weekly African FX newsletter to get actionable insights on currencies, trading and regulations straight from AZA Finance to your inbox.
Please enable JavaScript in your browser to complete this form.
Close