As Pablo Neruda says it: “You can cut all the flowers but you cannot keep spring from coming”. And this week, we the only things which may be cut are interest rates in Kenya, Ghana and Egypt. Spring is coming on African Markets.
Nigeria’s central bank kept the main interest rate at 14% on Tuesday. Central Bank Governor stated on the same day that speculators betting on a naira fall are taking a risk and will lose. He expects the black market rates to narrow further. Data from IHS show that following central bank’s decision, the cost of insuring Nigerian debt against default fell to its lowest since December 2016, with five-year credit default swaps dropping to 603 bps, down 9 bps from Tuesday’s close. The naira could stabilise provided the central bank manages to restore confidence in the market by containing the multiplicity of rates that can now be found in the country. At least five exchange rates have been identified i.e. the official one, a rate for Muslim pilgrims going to Saudi Arabia, the one for school fees abroad and a retail rate set by licensed exchange bureaus at 399. The NGSE ASI lost 0.77%.
Ghana’s central bank committee will meet on 27th March to make a decision on rates. The cedi has finally started to recover from record lows and inflation has reached its lowest level in years which both pave the way for a further cut in rates. The central bank already lowered its benchmark interest rate in November for the first time since May 2011. The GSE-CI gained 0.58%.
The MASI down 3.58%, the worst performer of the week. Saaddine El-Otmani of the moderate Islamist Justice and Development Party has been named Marocco’s new prime minister by the King Mohamed VI. El-Otmani has announced he will form a coalition of six parties together with people his predecessor, Abdelilah Benkirane, had declined to involve. The new prime minister said his priorities will be improving the quality of government services, education, health care, creating job opportunities, and fighting corruption.
The BRVM-CI lost 0.56%. The cocoa prices slump is hurting Ivory Coast’s economy up to a level it needs IMF’s help to help fund the country’s 2017 budget. Ivory Coast is the world’s largest grower of cocoa.
The rand has been rallying this week, dipping below R12.50 per dollar for the first time in 20 months. The currency found support in strong economic indicators released on Wednesday as well as a weaker dollar. Inflation came lower at 6.3% from the previous 6.6% in January. In addition, South African Reserve Bank data showed that the current account deficit narrowed to 1.7% of GDP in 4Q16, from 3.8% in 3Q16, bringing the average for the year to 3.1%, from 4.1% in 2015. However, it seems the improved trade balance reflects weak imports due to lack of local demand for intermediate goods, while the improved exports reflect better export prices rather than outright growth in export volumes. The JSE lost 1.40%.
