Sub-Sahara African Currencies Outlook in H2-19: …to mirror H1-19?


Friday, July 19, 2019   / 05:00PM / United Capital Research / Header Image Credit: iStock


Analysis of SSA’s foreign exchange condition showed that the performance was broadly divergent in H1-19. However, contrary to the broad base decline seen in 2018, the dovish global monetary policy stance provided support for some currencies in region in H1-19. 

Despite a weak macroeconomic condition in South Africa and Nigeria, the rand and the naira strengthened against the US dollar, thanks to increased Foreign Portfolio Investment (FPI) inflows during the period. FPIs flows was driven by investors seeking alpha returns in high yielding Emerging Market (EM) assets. Contrariwise, the Ghanaian cedi (GHC) was the worst performer among the currencies within our coverage as a surprise 100bps rate cut by the Bank of Ghana in Jan-19 and a further indication of policy easing sent the currency southwards. 

We expect currencies in SSA to follow the trend observed in H1-19. In Nigeria and South Africa, barring any external shocks, we expect the naira and rand to remain relatively stable. This will be buoyed by a sustained FX intervention and continued FPI inflows. In the CFA franc zones (WEAMU and CEMAC), we see further weakening in the CFA franc as BREXIT uncertainty continues into H2-19, given that the currencies are pegged to the euro. Similarly, we expect the pressure on the Ghanaian cedi (GHC) and Kenyan shilling (KES) to continue into H2-19 amid rising current account deficits. 


Top African Stories

• South Africa cuts rates as economy weak, inflation steady: The South African central bank cut its main lending rate by 25 basis points to 6.50%, as expected, citing weak economic growth and inflation which has stayed around the midpoint of its target range. Reuters


• Egypt says its economy on right track after 5.6% growth in 2018/19: Egypt’s economy grew 5.6% in the 2018/19 fiscal year and is “on the right track” as it completes IMF-backed reforms, Prime Minister Mustafa Madbouli said this week. Reuters


• Tanzania may review 2018 GDP figure after lower World Bank estimate: Tanzania’s statistics agency said on Thursday it may review its economic growth figure for 2018 after the World Bank came up with a significantly lower one. Reuters


• Nigeria's state oil firm awards oil-for-fuel swap deals:  Nigerian state oil firm NNPC issued award letters on Monday for highly sought-after contracts to exchange crude oil for imported fuel, oil industry sources told Reuters. Reuters


• Zambia dollar bonds soar after president swaps finance minister:  Zambia’s dollar-denominated government bonds jumped after the country’s president sacked Finance Minister Margaret Mwanakatwe and appointed central bank deputy governor Bwalya Ng’andu to replace her. Reuters


• Ghana Stocks Head for 21-Month Low as Banking Concerns Linger: Ghana stocks headed for the lowest in 21 months as investors sold shares to free up cash as they contend with the fallout from banking reforms in the West African nation. Bloomberg



Looking Forward


Jun-19 (CPI) Inflation - July 20th

Policy Rate Decision - July 26th



May-19 Production Index - July 22nd



Policy Rate Decision - July 22nd 



Policy Rate Decision - July 24th

Jul-19 (CPI) Inflation - July 31st



Jun-19 (CPI) Inflation - July 22nd



Policy Rate Decision - July 23rd


South Africa

Jun-19 Inflation - July 24th

Q2-19 Unemployment Report - July 30th

Jun-19 Trade Balance - July 31st



Policy Rate Decision - August 18th



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