AZA Finance FX Week Ahead: EIB grant to Ghana lifts Cedi as Naira slides with pre-holiday FX demand

FX Week Ahead: Cedi poised for further weakness as dollar demand persists
Cedi depreciation

Covid’s fastest surge this year slowing recovery
African Covid-19 cases are surging at the fastest rate this year, with infections rising by 83% over the past week to 196,000, driven by both the Delta and Omicron variants.

While deaths from Covid remain low in Africa, the continent’s lower vaccination rates heighten the risks of a healthcare crisis.

Michael Nderitu
Head of Trading, AZA

Distribution challenges continue to hinder vaccine programmes, with only 20 African countries vaccinating at least 10% of their population, according to the World Health Organization.

This suggests recovery efforts in Africa are likely to remain subdued in the near term even as economies slowly reopen from the initial pandemic shock.


Murega Mungai
Trading Desk Manager, AZA

Naira sliding with pre-holiday FX demand
The Naira weakened against the dollar on the unofficial market, sliding to 569 from 567 at last week’s close amid increased FX demand.

That came even as Nigeria’s inflation rate fell to its lowest level in 12 months, down to 15.4% in November—59bps lower than in October. The UK this week eased travel restrictions for Nigeria and 10 other African countries initially imposed to slow the spread of the Omicron Covid-19 variant.

With those restrictions lifted, we believe there could be an increase in FX demand in the coming weeks (or at least until year-end), which would potentially lead to a temporary spike in the Naira rate on the unofficial market.

EIB grant to Ghana lifts Cedi
The Cedi appreciated marginally against the dollar this week, strengthening to 6.165 from 6.187.

The European Investment Bank in Luxembourg on Dec. 13 signed an €82.5m concessional funding package to strengthen healthcare, provision of specialist medical equipment and medicines across Ghana.

With the support grant and ongoing intervention from the Bank of Ghana’s forward FX auctions, we expect the Cedi to continue its slow recovery against the greenback as we approach the end of the year.

Rand recovers with risk-on Fed bounce 
The Rand yoyod against the dollar this week, depreciating to 16.20 from 15.96 at last week’s close amid a broader retreat from risk assets amid concern over Omicron and the US Federal Reserve signalling rate rises, before returning to 15.96 levels as the Fed’s statement lined up with investor expectations.

With inflation in South Africa remaining above its key trading partners, including the EU, UK, US and China, we expect sustained volatility for the Rand in the coming days.

Egyptian Pound stable as inflation slows
The Pound was little changed against the dollar this week, sliding marginally to 15.74 from 15.70 at last week’s close. Egyptian exports increased by 24.5% in the first 10 months of the year, totalling $25.9bn.

Meantime, consumer price inflation slowed in November to 5.6% compared to 6.3% in October.

In a further boost to overall optimism, the country’s FX reserves have also increased this year, rising by $800m—with more inflows expected before year end due to relatively higher crude prices.

We expect the Pound to remain steady around the 15.7 level in the coming weeks given continued economic stability.

Terry Karanja
Treasury Associate, AZA

Kenya Shilling new lows as Omicron delays tourism revival
The Shilling continued to hover around a record low against the dollar this week, trading at 112.99 from 112.92 at last Friday’s close as demand for the greenback from importers continued to outweigh supply.

The emergence of the Omicron Covid-19 variant is likely to thwart hopes of a revival in Kenya’s tourism sector, which traditionally performs strongly in December. To that end, we expect sustained pressure on the Shilling as we head towards the end of the year.

Ugandan Shilling hit by yearend dollar demand
The Shilling weakened against the dollar, depreciating to 3563.04 from 3555.84 at last week’s close, pushed lower by a spike in dollar demand ahead of the festive period.

The Ugandan government this week took steps to establish trade links with the US and encourage the country’s diaspora to visit Uganda in an attempt to boost foreign currency inflows.

As we approach year-end, we foresee an uptick in dollar demand and hence sustained pressure in the coming days.

Tanzania receives $3bn AfDB pledge
The Shilling weakened slightly against the dollar, declining to 2305.69 from 2303.64 at last Friday’s close amid year-end demand for hard currency.

The African Development Bank this week pledged to provide Tanzania $3bn over the next five years to help support development projects across infrastructure, education and agriculture.

The funds will also be used to develop the private sector by enabling local banks to offer low-interest loans to help spur economic growth. With year-end dollar demand likely to continue, we expect to see moderate pressure persist on the Shilling in the coming days.

Note to journalists: please feel free to quote from this briefing for news reports and let us know any requests for further comment or interviews via the contact details at the end, or by reply to this email. AZA is Africa’s largest non-bank currency broker by trading volume at over $1 billion annually. See 

Issued by AZA. 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 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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Gavin Serkin
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