African Currency Weekly (with AZA)

Angola’s kwanza dances on a barrel of oil. The Libyan dinar has been confiscated. Naira Half Fig Half Grape. Cedi plummets. Rand is doing yo-yos with the Fed. The Egyptian pound pulled by the fastest growing of the century. After hitting the bottom, Kenyan shilling is sinking. Ugandan shilling rebellion. Tanzanian shilling relies on cooperation. Here are the trends in major African currencies presented by AZA Finance, Africa’s largest non-bank Forex broker: Trading volumes exceed $ 1 billion annually. Please note that AZA Finance partnered with the FTX cryptocurrency platform on March 15, 2022 to develop Web3 in Africa.

African oil currencies diverge as Kwanzaa dominates Dinard and Naira

Soaring oil prices after Russia’s invasion of Ukraine had different effects on the currencies of major African oil producers. Angola, Africa’s third-largest oil producer, has become the world’s highest-performing currency, with its currency Kwanzaa jumping nearly 15% against the dollar last month. In contrast, in Libya, the second largest producer, dinars fell 1.7% over the same period. This is partly due to the central bank’s purchase of dollars, as well as a decline in oil production after the militia closed two oil fields, including the country’s largest Sharala. In Nigeria, Africa’s largest oil producer, Naira was only underestimated due to record lows in informal markets. The Central Bank of Nigeria stopped selling foreign exchange at currency exchange offices last July, so the potential increase in crude oil exports from CBN reserves no longer drops to informal rates. This is currently just a reflection of supply and demand. In dollars. The impact on the real economy is even more complex. Nigeria exports crude oil, but because it imports refined products as fuel, there is a risk that import prices will rise and inflation will accelerate. Overall, a drop in oil prices this week from $ 123 earlier this month to less than $ 100 a barrel will ease exchange rate pressures in most of the world, especially in the largest net importers such as Kenya. Michael Nderitu
Chief Risk Officer of AZA.

Inflation in Nigeria rises as oil production slows

Nigeria has risen slightly against the dollar in this week’s informal market, trading at the closing price of 577 to 576.5 last week, just off the record low of 580. Nigeria’s crude oil fell from 1.427 in February to 1,417 million barrels per day. A month ago, we curbed the inflow of foreign exchange by a million dollars. Rising gas and liquid fuel prices have led to accelerated inflation, rising from 15.6% in January to 15.7% last month. Naira hopes to maintain these levels in the near future.

Cedi falls as bonds attract a small number of investors

Cedi hit a record low against the dollar this week, trading at a closing price of 7.084 to 7.159 last week. Ghana’s harsh economic environment prevented banks from selling the expected number of bonds at last weekend’s five-year auction, as inflation reached a six-year high of 15.7% in February. did. Investors bought 862 million cedi out of the 1 billion GHS offered at an interest rate of 20.75%, which is the upper limit of price forecasts. Pressure on Cedi is expected to continue for the next week.

Land enhancements are affected by the Fed’s upward response

The rand rose from 15.05 to 14.99 this week, rising against the dollar as South Africa’s economy recovered faster than expected due to the effects of the pandemic and rising commodity prices. The Federal Reserve raised interest rates by 0.25% this week, pushing the target range from 0.25% to 0.5% in line with market expectations. This is the first increase since 2018. The Federal Reserve also predicts that interest rates will rise to nearly 2 percent by the end of the year, one percentage point higher than expected in December. How the market digests the Fed’s tightening pace will determine Rand’s direction for the dollar over the next few days.

The fastest growth of the century shows Egypt’s rate of increase

The Egyptian pound was stable against the dollar at 15.71 this week. Egypt’s economy experienced the fastest six-month growth rate since the turn of the century, growing 9% between July and December 2021. However, Russia’s war in Ukraine, especially its impact on global wheat prices, can affect the country’s economic outlook. .. Egypt could raise interest rates next week, according to Fitch Ratings, and may need to seek the IMF’s help to mitigate the effects of the war, which creates uncertainty in the pound. However, this week’s transaction between Egypt and the Saudi Arabia Public Investment Fund should help stabilize the currency in the short term. Murega Mungai, Trading Desk Manager at AZA.

Kenya’s deficit widens as Schilling hits new lows

Shilling continued to weaken against the dollar, with demand for the dollar from oil importers restless, hitting a new high of 114.40 / 115 this week from 114.15, the closing price last week. This was filled with foreign exchange inflows from agricultural exports and remittances. Weak shilling boosted the balance of payments deficit in January from 4.3% in the previous year to 5.6% in GDP. Kenya aims to strengthen trade relations between Saudi Arabia and Oman, and representatives from both countries met with Kenya this week to discuss trade and investment opportunities. Meanwhile, the country’s foreign exchange reserves fell from $ 7.9 billion last week to $ 8 billion. Pressure on shilling is expected to continue for the next week as rising fuel and commodity prices are pushing up living costs.

Ugandan shilling is unlikely to recover

Shilling rebounded against the dollar this week, rising from last week’s closing price of 3610/3620 to 3580/3590. This strengthening was supported by increased inflows from commodity exporters and non-governmental organizations, outpacing importers’ demand for the dollar. In the future, commodity supply constraints are expected to add to inflationary pressure, and Schilling will be under further pressure in the near future.

Tanzania-Kenya Trade Barrier Agreement

Shilling weakened slightly against the dollar this week and fell from 2311/321 to 2312/2322 at the end of last week. Tanzania and Kenya have agreed to eliminate other trade barriers, such as delays in issuing dairy licenses, delays in customs clearance of goods, and mitigation of other cumbersome procedures. Relaxing trade restrictions between the two countries will help promote economic growth in Tanzania and improve liquidity conditions. Schilling expects to stabilize for the next week with the support of agricultural exports. Terry Karanja, Finance Associate, AZA..