Mounting debt in focus at AfDB meeting
The African Development Bank (AfDB) kicked off its annual meeting on Wednesday amid the continent’s worst recession in 50 years, with discussions focusing on the need to secure access to Covid-19 vaccines and tackle mounting debt to help African economies recover from the pandemic. The AfDB said it has launched a Debt Action Plan to help countries get their debt under control, while also committing $3bn to increase Africa’s capacity to produce Covid-19 vaccines on the continent to assuage concerns about supply shortages.

Nigeria FDI inflows increase 
The Naira edged higher on the NAFEX window, trading at 410 to the dollar compared to 411 at Friday’s close, supported by improved market liquidity following the recent supply squeeze. Meantime, the Naira fell on the parallel market to 500 from 493 at last week’s close, in part because the recent liquidity constraints on the NAFEX window has increased demand on the black market. The United Nations Conference on Trade and Development published its 2021 World Investment Report on Monday, which showed Nigeria’s FDI inflows rose 3.5% to $2.4bn last year—placing it behind Egypt, Republic of the Congo and South Africa, and on a par with Ethiopia. We expect the ongoing demand for dollars to increase pressure on the Naira in the coming days.

Ghana credit outlook turns negative
The Cedi weakened slightly this week, trading at 5.81 from 5.80 at last week’s close amid tighter market liquidity. At the end of last week, the Bank of Ghana launched a gold acquisition programme intended to double its gold holdings over the next five years, marking a significant change to the way Ghana’s central bank manages its foreign exchange reserves. On Tuesday, Fitch Ratings revised Ghana’s credit outlook to negative, citing a significant deterioration in the country’s public finances stemming from the Covid-19 pandemic and its inability to absorb any further economic shocks for an extended period. Fitch affirmed Ghana’s current single ‘B’ rating, reflecting its high public debt level and low revenue base. Against that backdrop, we expect sustained pressure on the Cedi in the coming days.

South Africa rocked by third Covid wave
The Rand swooned again this week, plunging to 14.26 against the dollar on Wednesday compared to 13.77 seven days earlier. The slump came as coronavirus cases surged across South Africa, with the country now gripped by a third wave of infections that has resulted in the government tightening lockdown restrictions, including a curfew between 10pm and 4am. This exacerbated an already weakening trend for the Rand amid expectations that the US Federal Reserve could start lifting rates sooner than previously thought. South Africa’s electricity provider Eskom on Wednesday said it would increase load shedding this month to ease strains on the power grid, causing interruptions to the country’s electricity supply. All of this means the Rand is likely to remain under pressure during the coming week.

Egypt secures latest AfDB green support loan
The Pound appreciated to between 15.60 and 15.70 against the greenback as dollar inflows increased. At the back end of last week, the African Development Bank approved an $83m loan to finance the second phase of Egypt’s Electricity and Green Growth Support Programme. The United Nations Economic and Social Commission for Western Africa said that ending conflict in Libya could unlock economic gains for countries in the region, with Egypt potentially benefiting to the tune of $100bn by 2025. We expect to see more gains for the Pound given expected inflows from investors and the tourism sector.

Kenya bond deal boosts Shilling
The Shilling posted marginal gains against the dollar this week, edging up to 107.65/107.85 due to subdued dollar demand and upbeat sentiment following the issuance of a $1bn Eurobond that was more than four times oversubscribed. We expect inflows from remittances and Kenya’s robust foreign exchange reserves (adequate for 4.57 months of import cover at $7.47bn) to keep the Shilling steady over the coming week.

Uganda reimposes Covid lockdown
The Shilling slipped to 3565/3575 to the dollar from 3530/3540 at last week’s close amid increased dollar demand from corporates and the interbank market, which outweighed supply. The weaker sentiment was also underpinned by Uganda’s President Yoweri Museveni last Friday reimposing a 42-day lockdown until the end of July to curb the spread of Covid-19. Restrictions include the closure of all educational institutions, restrictions on non-food markets, travel bans, and the suspension of church services. Given the likely impact on economic activity, we expect to see more pressure on the Shilling in the coming days.

Tanzanian coffee exports at eight-year high
The Shilling was unchanged at 2314/2324 to the dollar compared to last week’s close. The Tanzanian Coffee Board on Tuesday said coffee exports hit an eight-year high of $137m for the 2020/21 season—a 20% increase on the previous 12 months. Tanzania’s President Samia Suluhu on Monday met with Chinese President Xi Jinping to discuss potential cooperation in agriculture, transport, telecoms, tourism, energy and investment. With the approval of $293 million of funding for an infrastructure project in Zanzibar by the World Bank, we expect dollar inflows to support a stable outlook for the Shilling in the coming week, balanced by dollar demand from the manufacturing and energy sectors.