The marble Metical of Mozambique facing the third term of President Filipe Nyusi. The Naira reaches the bottom and digs in. The Cedi shaken by a possible default of Ghana. The Rand plunges under interest rate pressure. The Egyptian pound lies at the foot of the pyramids. The Kenyan shilling in the trough of the wave. The Ugandan Shilling affected by Ebola fever. The Tanzanian shilling at its highest for three months. Read the analysis of AZA Finance for the week of October 3 to 10, 2022.
Mozambique and Equatorial Guinea in the spotlight
Africa’s elections are back in the spotlight this week, as the world’s longest-serving president — Teodoro Obiang of Equatorial Guinea — announces he intends to run once more in November’s elections to extend a 43-year term that began following a coup he led in 1979. Also this week, Mozambique’s President Filipe Nyusi was re-elected for a third five-year term, despite the country’s constitution that allows only two terms. As his term as the country’s president ends in 2024, Nyusi is expected to lead his party until 2027. Both nations struggle with poverty fueled by widespread corruption despite wealth from fossil fuels and other minerals that make up a part significant income. Both sectors are also expected to see some growth as pandemic-related challenges recede and domestic demand improves. The ongoing search for alternatives to Russian gas is also expected to boost foreign exchange inflows into gas-rich Mozambique and bolster its reserves.
Naira Hits New Low, Even as CBN Rates Rise
The Naira fell to a new record low once morest the dollar this week, trading at 734 on the unofficial 715 market at the close of last week. The sharp drop came even as Nigeria’s central bank hiked rates by 150 basis points to 15.5%, as it seeks to tackle high inflation, which the bank said will has been exacerbated by worsening insecurity, breakdown of essential infrastructure and high import costs for commodities such as wheat. The destruction of agricultural land and livestock due to the recent floods also threatens shortages of agricultural products. In the near term, we expect the Naira to continue its depreciation once morest the dollar amid increased demand for currencies in the parallel market.
Cedi hits new low as Fitch warns Ghana default ‘likely’
The Cedi dipped to a new record low this week, trading at 10.38 from 10.11 at the end of last week. Ghana said it entered talks with the IMF this week as it seeks a three-year, $3 billion loan package to stabilize its economy, given soaring borrowing costs shut the country out of global financial markets. The IMF is expected to conclude an 11-day mission to the country at the end of next week. Market watchers predict that Ghana will have to restructure its debt to unlock any IMF financing. Fitch Ratings has downgraded Ghana’s credit rating to CC by one notch, signaling a default of some sort seems likely. Against this backdrop, we expect the Cedi to continue to weaken beyond the 10.50 level in the near term.
Rand sinks past 18 in risk asset selloff
The Rand has depreciated once morest the dollar this week, trading at 18.02 from 17.95 at last week’s close, the first time it has fallen from 18 since May 2020. The latest The drop came as risky assets continued to sell following the US Federal Reserve rate hiked 75 basis points last week. On the home front, the South African economy lost 1.6 million working days in the first half of the year due to strike action, mostly over wages. Public sector workers may strike for the first time in a decade for mediocre wages. Given global risk aversion and the country’s domestic challenges, we expect the rand to remain under pressure in the near term.
Egyptian pound hits low as foreign exchange reserves fall
The Egyptian pound hit a record low of 19.53 once morest the dollar this week,
before recovering to trade at 19.48, slightly higher than the end of the
last week of 19.49. The shortage of dollars continues in the country, the reserves
Egypt’s net foreign exchange rate of $33 billion in August, the highest level
lowest since 2017. Government seeks to raise up to $6 billion by
June next year from the partial sale of still anonymous controlled entities
by the government through a series of IPOs. Given the strength of the dollar, tensions
increased surrounding Russia’s war in Ukraine and strained economic conditions
domestically, we expect the pound to weaken further over the
next weeks.
Kenyan shilling hits new low as dollar soars
The shilling has fallen to a new low once morest the dollar this week, trading at 120.50/120.70 from 120.35/120.65 at last week’s close as demand for FX remains elevated and that the greenback continues to strengthen following last week’s US rate hike. Although we expect the shilling to remain under overall pressure over the coming week, due to month-end demand for dollars from importers, Kenya might reap some benefits from the recent crisis. financial crisis in the UK, which plunged the pound sterling to a record low once morest the dollar. Although Kenya’s exports to Britain, such as cut flowers, may decline, the country might see the costs of imports from the UK, including cars, machinery, alcoholic beverages, pharmaceuticals and electronics decrease. About 2.3% of Kenya’s external debt is denominated in sterling.
Shilling slips amid Ebola outbreak in Uganda
The Shilling has depreciated once morest the dollar this week, trading at 3861 from 3820 at last week’s close, pushed lower by the stronger greenback from the Fed. Ebola infections have increased across the country, with nearly two dozen suspected deaths recorded earlier this week. Interns at the hospital handling the largest number of cases also went on strike this week, citing a lack of proper safety equipment, hazard pay and health insurance. Meanwhile, Uganda said coffee production might hit a record high in the 2022/23 growing season due to better rainfall and plantings. Overall, we expect the shilling to continue to weaken in the near term.
Tanzanian shilling hits three-month high
The shilling hit 2328 this week, its highest level since June, before
back down to 2332, which corresponds to the end of last week. Tanzania said
this week that it is partnering with India to build irrigation systems across the
country to increase agricultural production. She has already started to build more than one
dozen large dams in preparation. Meanwhile, the Bank of Tanzania has declared
that it will continue to gradually reduce market liquidity until the end of October
to cope with rising inflation. After a recent trip by American investors
in Tanzania, we expect capital inflows to strengthen the shilling to
court terme.
