Grim budget in SA, Nigeria’s FX buzz and debt woes

South Africa’s emergency budget highlighted that the government plans to turn to harsh austerity to try to deal with the legacy of higher debt, but this is unlikely to be politically sustainable in the long run. Nigeria’s debt problems are of a different kind – and both public and private debts are a growing concern. Meanwhile, the unification of the main exchange rates seems to be all talk but no action at this stage.
Virag Forizs Emerging Markets Economist
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Africa Economics Weekly

FX orthodoxy in Nigeria? Strikes in SA, Ethiopia’s conflict

Comments by Nigeria’s vice president endorsing a more market-based exchange rate regime reflect growing concern about the distortionary effects of the current FX system, but there is no evidence that key officials backing the existing currency arrangements are also shifting tack. In South Africa, ongoing industrial action in the steel industry will probably dampen manufacturing output in Q4, in another hit to the recovery in the sector and the wider economy. Finally, escalating tensions in Ethiopia raise the spectre of more severe strains in the balance of payments.

15 October 2021

Africa Data Response

Nigeria Consumer Prices (Sep.)

The drop in the headline inflation rate in Nigeria, to 16.6% y/y in September, will ease pressure on the central bank to raise rates and allow policymakers to focus on supporting the economic recovery.

15 October 2021

Africa Data Response

South Africa Activity Data (Aug.)

South Africa’s hard activity data for August point to a bumpy recovery following a large hit to the economy in July, adding to reasons to think that interest rates are unlikely to be raised imminently.

13 October 2021

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Africa Data Response

South Africa Manufacturing PMI (May)

The rise in South Africa’s manufacturing PMI in May points to an improvement in underlying economic conditions in the sector, but we think that the recovery will  be held back by key headwinds including another virus surge, slow vaccine rollout, power cuts and austerity.

1 June 2021

Africa Economics Weekly

Naira devalued for real, utility deals in Ethiopia & SA

Policymakers in Nigeria appear to have bowed to pressure to devalue the official exchange rate, which will probably improve the public finances and help unlock multilateral financing. That said, a unified and fairly valued naira is unlikely to follow any time soon. Meanwhile, Ethiopia’s ambitious reform agenda seems to be faltering on nearly all fronts. In South Africa, troubled electricity provider Eskom was a source of good news this week for a change, but power cuts are likely to remain a threat to the economic outlook.

28 May 2021

Africa Economics Update

CBN keeps inflation-fighting tools on the shelf

Policymakers in Nigeria kept their benchmark rate on hold at 11.50% at today’s MPC meeting, opting to emphasise the fragile nature of the economic recovery over elevated inflation. With price pressures likely to ease, we think that monetary policy settings will remain unchanged over our forecast horizon.

25 May 2021
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