AZA Finance FX Week Ahead: Cedi climbs as lower oil price eases dollar demand

The Cedi gained against the dollar, climbing to 12.25 from 12.41 at last week’s close as FX demand eased amid a decline in oil prices. Ghanaian Finance Minister Ken Ofori-Atta said that talks are continuing with China about restructuring its debt following a successful domestic debt exchange Programme.

China is Ghana’s biggest bilateral lender, with about $1.7bn in loans outstanding. Ghana needs to reach a deal with all its creditors to unlock a $3bn bailout from the IMF. We expect the Cedi to continue trading around current levels in the short term, absent further progress in the restructuring talks.

The Naira depreciated against the dollar, sliding to 741 from 731 at last week’s close as FX demand increased and the central bank allowed old 500- and 1000-Naira notes to recirculate. Nigeria’s annual inflation edged higher in February, with prices rising 21.91% compared to 21.82% a month earlier.

That prompted the central bank to raise interest rates by 50bps to 18%. The cash scarcity in recent weeks forced Nigerians to turn to e-payment channels, where transactions in February jumped 121.6% compared to a year earlier. We expect the Naira to continue weakening against the dollar in the near term as FX demand gathers steam.

Rand edges towards 17 handle amid Fed pause signal
The Rand strengthened against the dollar, trading at 18.15 from 18.40 at last week’s close, after the US Federal Reserve signaled a pause in interest rate hikes to allow the banking system to recover. South Africa had its first full day in 141 days without a rotational power cut this week. An opposition-led march caused little disruption after the government deployed the army to avoid a repeat of the unrest that erupted in July 2021 protests. We expect the Rand to continue edging towards the 18 level, potentially trading with a 17 handle if recent positive international momentum is maintained.

Egypt Pound weakens as imports drive dollar shortage
The Pound declined against the dollar, trading at 30.89 from 30.48 at last week’s close. Egypt agreed to a new framework with the World Bank this week that will enable access to as much as $7bn in financing between now and 2027 to support economic reforms, including privatization, job growth, and the development of sustainable projects. The Suez Canal Authority reported a 40% increase in first-quarter revenue compared with the same period a year ago due to increased transit rates and shipping traffic, providing much-needed FX inflows. Overall, we expect the Pound to continue weakening in the short-to-medium term as the economy remains largely reliant on imports and faces a net dollar shortage.