Africa Currency Weekly (with AZA)


The war in Ukraine weighs on African currencies. Naira jostled by port chaos. The CEDI is losing ground against the dollar. The Rand rebels. The Egyptian pound immunized by the Chinese vaccine. The Kenyan Shilling blames expensive oil. Headwinds on the Ugandan shilling. The Tanzanian Shilling bets on gas. The Ugandan Shilling bets on Europe. Here are the trends of the main currencies of Africa for the week of February 28 to March 06, 2022 presented by AZA Finance, the largest non-bank foreign exchange broker in Africa, with a transaction volume of more than 1 billion dollars per year.
War in Ukraine weighs on African currencies

Russia’s invasion of Ukraine sent oil prices to their highest level in eight years, increasing pressure on oil-importing African economies like Kenya where the shilling fell to its lowest level. lowest level this week. Meanwhile, African countries, including Tanzania, Nigeria, Algeria and Mozambique, may be able to boost gas and oil exports to Europe and elsewhere, given continued supply disruptions from of Russia. While Africa-Russia trade, which stood at $20 billion in imports and exports last year, is likely to decline, the biggest impact for most Africans could be a further increase. food prices, in part because Ukraine is one of the largest wheat exporters, especially in the Middle East and North Africa. Michael Nderitu Chief Risk Officer, AZA.

Naira Stable as Port Chaos Balances Oil Rise
The Naira was unchanged against the dollar in the unofficial market this week, trading at 575. Protests over a new vehicle identification number valuation system have caused delays at ports in Lagos, and further traffic jams are expected as new vehicles arrive. Clearing agents say the new system has dramatically increased import duties, making it difficult to clear vehicles from ports, which could have economic repercussions the longer protests continue. The disruption counteracts the effects of rising oil prices caused by the war in Ukraine. We expect the unofficial rate to remain at this level over the coming week.

The CEDI retreats against the dollar
The CEDI lost further ground against the dollar, falling from 6.560 to 6.619 at last Friday’s close, a depreciation of 0.9%. This downward trend is attributable to an increased demand for dollars that exceeds the supply. In this context, the Bank of Ghana has ordered banks and brokers not to trade above the official rate. In order to deal with the depreciation of the Cedi, the government has been advised by some experts to assess and monitor the repatriation of income by foreign companies operating in Ghana, as well as put in place measures to regulate the money sent out of the country by wealthy Ghanaians to pay overseas tuition fees, hospital bills and other services, according to a report by the Ghana News Agency this week. We expect the current pressure on the Cedi to continue in the near term.

Optimistic fiscal balances for the Rand

The Rand has strengthened against the dollar this week, trading at 15.03 from 15.12 at last Friday’s close. In his first budget speech this week, Finance Minister Enoch Godongwana pointed out that the COVID-19 Welfare Fund would be extended for 12 months due to additional revenue from rising commodity prices. Meanwhile, the government has lowered personal income tax brackets and refunds by 4.5% in a bid to offset the effect of inflation pushing income earners into lower incomes. higher tax brackets. The budget speech also highlighted that income tax and VAT collection were higher than expected, while corporate revenues and profits held up. The robust domestic backdrop should help shield the Rand from the impact of rising oil prices in the coming days.

The health of the Egyptian pound is linked to vaccine talks with China
The pound continued to trade in a tight range of 15.71-15.74 against the dollar over the past week. Egyptian and Chinese officials are due to hold talks before the end of the month over potential exports of Sinovac COVID-19 vaccines to be produced in Egypt and sent to other African countries. The country has already produced around 30 million doses of Sinovac and is currently negotiating with AstraZeneca to manufacture its vaccine locally. Meanwhile, Egypt plans to launch a new wheat import tender amid Russia’s invasion of Ukraine and potential disruption of grain markets. Egypt expects wheat imports to decline this year due to its recent efforts to boost local production. We expect the Pound to hold below 15.75 in the coming weeks.

Kenyan Shilling Hits New Oil Low

The Shilling weakened to a new record low against the dollar, trading at 113.80/114.40 from 113.60/114.20 at last week’s close. The latest round of pressure came as global oil prices hit their highest level since 2014, pushing up import costs and driving inflation. Kenya’s foreign exchange reserves fell further, from just under $8.2 billion the previous week to $8.13 billion, enough to cover 4.97 months of imports. The escalating conflict in Ukraine and anti-Russian sanctions are likely to lead to more pressure on the Shilling in the coming days.

End of month collection to support the Ugandan Shilling
The Ugandan Shilling has depreciated slightly this week, trading at 3510/3520 against
3500/3510 at the end of last week, with demand from dollar importers outweighing inflows. President Yoweri Museveni this week called on Europe to open its market to African food products to help improve farmers’ incomes, during a meeting with Norwegian State Secretary for International Development Bjorg Sandkjaer. We expect the Shilling to stabilize at its current level on the back of inflows from the dollar at the end of the month.

Investment Boosts Tanzanian Shilling Outlook
The Shilling weakened slightly against the dollar this week, falling from 2308/2318 to
2311/2321 at the end of last week. President Samia Suluhu Hassan said this
week in an interview with The Africa Report that tensions in Ukraine are contributing to
stimulate European interest in gas from Tanzania. At the same time, the Commission
European Union announced a donation of 425 million euros to Tanzania to finance various projects
of development over the next three years, including digitization, cities
green and gender equality. The government has also signed with the World Bank two
concessional loan agreements worth $650 million to improve
education and land administration systems. These investment inflows, associated with
export earnings from gold, manufactured goods and tourism, should support the
Short term shilling.


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