Rising oil anchors Naira
The Naira maintained a stable footing in the parallel market at 482.5 per dollar levels amid a slowdown in speculative purchases of the greenback. The currency depreciated slightly at the Importers & Exporters window to N411 from N410 at the end of last week. The outlook remains dependent on Covid-19 along with illiquid foreign exchange conditions and rising inflation (now 18.17%, from 17.33% in February). EFG Hermes described Nigeria’s economic recovery process as fragile as the macroeconomy remains complicated and in need of structural reforms. In the coming week, we expect the Naira to remain stable in the parallel market at 482.5 levels and 410-415 levels at the I&E as oil prices drive toward $70 amid reduced stockpiles.

Reforms point to stronger Cedi
The Cedi strengthened to 5.7700 from 5.7850 this week amid implementation of newly reviewed taxes on fuel. The margins on prices of petroleum products went up by 17 pesewas per litre. The National Petroleum Authority (NPA) responded by reducing the 17-pesewa margin to 9 pesewas in an effort to combat the the effects of the new levies on livelihoods. Meanwhile, the Head of the EU delegation to Ghana, Diana Acconcia, disclosed that the bloc is set to remove Ghana from the list of money laundering and terrorist financing countries. The EU is taking this action because Ghana has made significant progress in corrective measures to deal with issues raised by the Financial Action Task Force (FATF), Acconia said. Against this backdrop, we expect the currency to further strengthen towards 5.70 levels. 

Positive PMI buoys Rand
The Rand strengthened from 14.38 to 14.45 this week as IHS Markit's Purchasing Managers' Index (PMI) indicated a sharp acceleration in the economic recovery from Covid-19 across South Africa. New business volumes are growing at the strongest rate in nine years, driven by rising economic confidence, increased movement and improving export demand. The index rose to 53.7 in April from 50.3 in March, with a reading above the 50 level indicating expansion. The currency uptick was further supported as the greenback weakened on falling Treasury yields. We expect further momentum towards 14.15 levels.

Business curfew weakening Egyptian Pound
The Egyptian pound traded at 15.62 to the dollar, falling slightly from 15.61 last week. The government has imposed early closure of stores, malls, restaurants and other business activities for the next two weeks to curb Covid-19. The number of new coronavirus cases has been steadily rising in Egypt in recent weeks and officials have warned of infections spreading further as families meet during Ramadan, which ends next week. With the Eid festivities approaching, the government has revised closing hours for most businesses to 9pm. Concerns of a partial lockdown and slowdown in economic activities may drag the currency towards 15.70 levels.

Eco takes step closer to reality
The Eco currency took a further step towards becoming a reality, with France beginning a transfer of 5 billion Euros to the Banque Centrale des États de l'Afrique de l'Ouest in support of reforms for the currency in the XOF region. France's minister of finance assured that the reforms would be implemented to the fullest and will support autonomy to countries in the region to invest in financial institutions and instruments of their choice, with France no longer keeping the reserve accounts.

Horticulture lifting Kenyan Shilling
The Kenyan Shilling strengthened to KSh 107/107.30 per dollar amid lower imports along with increases in tea and horticultural exports, and remittance receipts. Kenya’s Bureau of Standards reported that inflation in April dropped to 5.76% from 5.9% in March, driven by lower food costs. New Export Trade programme (NExT), a European Union funded project that started a year ago, will invest €5 million (Sh650 million) in Kenya’s horticultural sector. The programme is aimed at increasing the contribution from the horticultural sector to household income through employment opportunities and foreign currency earnings. We expect continued support from investment to support further gains in the Shilling.

Uganda inflows boost Shilling 
The Ugandan Shilling appreciated to 3560/3570 levels this week, driven by offshore and month-end nongovernmental organisation (NGO) inflows into the country. The April monetary policy report from the Bank of Uganda predicted the economy will grow 3-3.5% in the financial year 2020/21, rising to 4-4.5% for 2021/22 and 6-7% in subsequent years. We expect inflows from the agricultural sector and investments will keep the Ugandan Shilling strengthening in the near term

Gold support for Tanzanian Shilling
Tanzania’s Shilling traded steadily at the same levels as last week's close, at 2310/2324. On Monday, the government issued a new travel advisory and 14 measures aiming at controlling Covid-19 pandemic. President Samia Suluhu Hassan is using a visit to Kenya and bilateral talks with President Uhuru Kenyatta to promote investment and trade. According to the Bank of Tanzania, the value of gold exports increased to $3.025 billion in the year ending March 31, from $2.324 billion previously. Exports including gold are likely to continue supporting the Shilling at current levels near term.