Naira and rand in the firing line

Currencies in sub-Saharan Africa have continued to come under pressure this month, with both the South African rand and Nigerian naira falling to record lows. The naira has suffered from the further falls in oil prices, with the central bank’s move last month to hike interest rates and devalue the currency having little effect. South Africa should actually be a major beneficiary from the fall in oil prices, but recent data showing a larger-than-expected current account deficit triggered concern in the currency market. Looking ahead, low oil prices and a lack of international competitiveness mean that we expect both currencies to weaken next year. And we think that policymakers will respond by raising interest rates further.