AZA Finance FX Week Ahead: Record low for Cedi as Ghana halves FX auction support

The Ghana cedi

Prospect of $50 billion relief for African debt markets
Amidst rising US interest rates, geopolitical tensions and global recession concerns, the rush to haven assets is causing havoc for many African economies. Rapid currency depreciation, high inflation and rising debt levels risk becoming vicious cycle as investors demand a higher premium for holding African bonds, making it harder for some countries to maintain capital market access.

To help ease those strains, a Bill and Melinda Gates Foundation-backed think tank is seeking to raise $50bn to support African nations that are facing debt distress and help them avoid default. The funding would be channeled through the Paris-based think tank Finance for Development Lab, which has devised an African Liquidity and Stability Mechanism to help provide debt relief.

The mechanism is to be funded in part by rich countries rerouting their allocations of the IMF’s special drawing rights to African countries, in alignment with the Liquidity and Sustainability Facility initiative from the United Nations Economic Commission for Africa, which is represented on the think tank’s steering committee. Such assistance is urgently needed to help renew investor confidence in African assets and boost demand for local currencies.

Naira rallies from record low after bureau de change raids
The Naira rallied against the dollar this week, trading at 655 after hitting a record low 710 towards the end of last week, amid an official crackdown on speculators. Nigeria’s Economic and Financial Crimes Commission raided bureau de change hubs in the past week on suspicion that speculators have been buying up all available dollars in the informal market to create artificial scarcity, according to The Africa Report.

Meanwhile, the government this week inaugurated a committee to revamp Nigeria’s cocoa industry and improve the livelihood of cocoa farmers by ensuring they receive a fair price for cocoa sales, as practiced in Cote D’Ivoire and Ghana. We expect the Naira to continue appreciating in the coming days as FX speculators looking to take profits has triggered a wave of dollar selling on the unofficial market.

Record low for Cedi as Ghana halves FX auction support
The Cedi dropped to a fresh low against the dollar this week, trading at 8.65 from 8.30 at last week’s close, after the Bank of Ghana halved the size of its bi-weekly FX auction, now selling just $25 million into the market.

The government expects inflows from a $750 million syndicated loan approved by Parliament before the end of Q3, in addition to a 1.3 billion cedi Cocobod loan and potential IMF funding based on current negotiations.

Until this financing is drawn down, we expect the Cedi to remain under pressure, likely crossing the 9 threshold given that dollar demand is extremely high.

Sliding Rand heading towards 17 levels 
The Rand depreciated against the dollar this week, trading at 16.85 from 16.58 at last week’s close amid risk-off sentiment in global markets and rising inflation at home.

South Africa this week announced plans to scrap tariffs on chicken imports to help ease food price inflation. Annual inflation hit 7.4% in June—the highest level since the financial crisis.

South African energy company Eskom also warned of more rolling power cuts in the coming days as its ageing power stations fail to keep pace with demand. We expect more volatility in the near term that will likely push the Rand above 17 to the dollar.

Five-year low Egyptian Pound to remain under pressure
The Pound slid to its weakest level against the dollar in more than five-and-a-half years, trading at 19.09 from 18.94 at last week’s close.

Egypt—one of the world’s largest wheat importers—continues to grapple with rising grain prices, sending annual inflation soaring to around 15%.

Pressures could start to ease after Ukraine was able to release its first grain shipment after Russia relaxed its Black Sea blockade, with 16 more shipments expected to follow.

That has sent wheat futures lower, which should benefit Egypt in the short-to-medium term. For the immediate term, however, we expect the Pound to remain under pressure and continue trading above 19 to the dollar.

Record low Kenyan Shilling to slide further in election week 
The Shilling weakened to a fresh record low against the dollar this week, trading at 119 from 118.95 at last week’s close as uncertainty persists ahead of next Tuesday’s presidential election.

Kenya’s import cover has fallen to its lowest level in six-and-a-half years as the country’s FX reserves continue to shrink and remain unreplenished after it cancelled a roughly $1bn Eurobond back in June due to rising borrowing costs. We expect the pressure on the Shilling to be sustained going into next week’s election.

Inflation to keep Ugandan Shilling weakening
The Shilling weakened marginally against the dollar, trading at 3871 from 3866 at last week’s close, just shy of its record low 3878 hit last week.

Annual inflation accelerated for a sixth straight month, rising to 7.9% in July from 6.8% in June—the highest reading since December 2015, mainly due to surging food and transport prices.

Uganda’s commercial banks are planning to provide a UGX1tr export credit facility to help local manufacturers boost sales in regional markets. The facility is expected to be rolled out later this year.

We forecast further weakness for the Shilling in the near term due to the growing inflationary pressures in the country.

Tanzanian Shilling to steady amid gas opportunity
The Shilling weakened marginally against the dollar this week, trading at 2332 from 2330 at last week’s close.

Tanzanian policymakers met this week as the country seeks to capitalize on its natural gas reserves and the current elevated prices amid supply constraints caused by Russia’s war in Ukraine.

Tanzania has around 57.5 trillion cubic feet of recoverable gas reserves. We expect the Shilling to remain steady against the dollar in the near term, supported by inflows including the recently announced African Development Bank grant to support small businesses.

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


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