Reasons for optimism are few and far between

The past month has seen a raft of very bad news from key African economies. New government figures show that growth slowed in Q2 in Ghana and that South Africa’s economy actually contracted. Forward-looking indicators in Uganda continued to slide as a result of faltering confidence, while Zambia faces mass job losses as mining firms halt production in the country. The worst news, however, came from Nigeria. Growth there slowed to 2.3% y/y in Q2 and Central Bank of Nigeria Governor Godwin Emefiele has mentioned the risk of a recession in 2016. Low oil prices have been one factor behind the country’s slump, but Governor Emefiele’s attempts to support the naira have made the situation much worse. We believe that Nigeria runs the very real risk of sleepwalking into a policy-induced crisis as FX controls limit domestic demand and banking reforms squeeze liquidity out of the banking system.