AZA Finance FX Week Ahead: Cedi off lows while T-bill sales disappoint

dollar-denominated bonds

Third coup marks disturbing trend

As the saying goes, once is a phenomenon, twice a coincidence, but three times – that’s a trend. Burkina Faso this week became the third West African country in the past 12 months to see its government toppled in a military coup.

Michael Nderitu
Head of Trading, AZA

Military leaders said they ousted President Roch Marc Christian Kabore because of his inability to tackle insecurity caused by a long-running Islamist insurgency.

The country’s borders have been closed, blocking trade and other activities with neighbouring countries.

West Africa’s regional economic bloc ECOWAS said it would hold the military liable for Kabore’s well-being given that his whereabouts is unknown.

The 15-member bloc earlier this month imposed sanctions on Burkina Faso’s northern neighbour Mali after its military ruler said it would delay holding elections following its coup last year, underscoring the fragile political backdrop in the region.

Murega Mungai
Trading Desk Manager, AZA

Naira steady as central bank holds rates
The Naira held firm against the dollar on the unofficial market this week, trading flat at 570. Nigeria’s FX reserves eroded further declining $136m over the past week to $40.24bn, according to the central bank’s 30-day moving average data.

The CBN held its benchmark interest rate at 11.5% for the 14th straight month, citing Nigeria’s immunity to the effects of US policy normalisation. The government this week rowed back on a plan to remove a petrol subsidy that would have potentially hiked pump prices by 150%.

That reversal casts fresh doubts on the implementation of the Petroleum Industry Act, which hinges on the petrol subsidy removal. The Naira’s street rate appears to have stabilised at current levels and we expect it to maintain this in the coming days.

Cedi off lows while T-bill sales disappoint
The Cedi appreciated marginally this week, trading at 6.24 compared to 6.26 at last Friday’s close.

Ghana’s treasury bill auction at the end of last week fell short of expectations, with the country selling GHS1.14bn of 91-, 182- and 364-day bills, compared to a target amount of GHS1.35bn.

Given that its dollar debt is trading in distressed territory, the government ruled out issuing any Eurobonds this year, instead turning its focus on domestic debt markets. It also has an international promotion campaign underway to attract foreign tourists. With that in mind, we expect the Cedi to continue its marginal appreciation over the coming week.

Weaker Rand fate rests on SARB decision

The Rand weakened against the dollar this week, trading at 15.22 from 15.10 at last week’s close.

Stronger commodity prices helped prevent a steeper decline, as did increased evidence that the Omicron Covid-19 variant is replacing more severe versions of the disease, potentially signaling the end of the global pandemic.

We expect the South African Reserve Bank’s rate decision to continue dictating the Rand’s direction in the coming days.

Egyptian Sumurai planned amid positive FX outlook
The Pound has been relatively stable against the dollar this week, flip-flopping between 15.71 and 15.74.

Egypt said it plans to issue Samurai bonds this year—yen-denominated debt sold by foreign entities into the Japanese market—to help fund its 12.5% monthly wage hike and to grow the economy 5% by year end.

That target could be hindered by the potential increase in wheat import costs due to poor weather conditions, as well as the escalating Ukraine-Russia border tensions.

Egypt has also come under fire from the EU for its import registration process that restricts goods ranging from farm produce to home appliances, restrictions the EU claims are illegal under WTO rules.

Overall, we believe the outlook for the Pound remains positive given the combined effects of higher export earnings and expected investment inflows, holding it at around the 15.7 level.

Terry Karanja
Treasury Associate, AZA

Kenyan Shilling arrests slide with GDP bounce back
The Shilling finally arrested its slide against the dollar this week, strengthening by a wafer-thin margin to trade at 113.56 compared to 113.59 at last week’s close.

Kenya’s central bank held its main interest rate at 7% for the 15thconsecutive meeting as inflation remained within its target range and the economy rebounded strongly—GDP growth hit 9.9% in the third quarter of 2021 compared to 2.1% a year earlier.

We expect the Shilling to be relatively stable in the coming days, though it could come under slight pressure as we head towards month end.

Record coffee earnings steady Ugandan Shilling
The Shilling was unchanged against the dollar this week, trading at 3515 having briefly weakened to 3519. Coffee export earnings reached a record high of $75.2m in December compared to $71m a month earlier, according to the Uganda Coffee Development Authority.

It said December’s performance was down to the timing of newly planted coffee in the previous year, which coincided with good weather conditions. Export earnings from the Ugandan free trade zone grew by $1.2bn between 2020 and 2021, up from just $154m in the previous 12-month period, driven by increases in mineral and tobacco-processing activities. We expect this trend to continue, which should keep the Shilling stable in the near term.

Export potential lifts long-term Tanzanian Shilling outlook 
The Shilling depreciated to 2310 against the dollar this week from 2306 at last week’s close as demand for dollars outweighed supply.

Transport Minister Makame Mbarawa this week assured investors of the government’s commitment to improve key infrastructure, citing projects across various regions by the Tanzania National Roads Agency (TANROADS).

Meanwhile, domestic banks have extended credit to the private sector, increasing at an annual rate of 13.5% in November from 12.5% a year earlier, amid a fall in the overall lending rate.

Against this backdrop, we expect a better operating environment for local businesses and a potential boost in exports to maintain current levels for the Shilling, with scope for appreciation in the longer term.

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.

For more information, high-resolution charts or interviews, please contact:

Gavin Serkin
[email protected]
+44 20 3478 9710


Leave a Reply