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Nigeria

Tighter global financing conditions, Zambia’s debt

African financial markets are not insulated from the tightening of global external financing conditions, and recent currency weakness and rising sovereign bond yields in the region will only add to already-strained balance sheets in some economies. Ghana, Kenya and Ethiopia seem most vulnerable. In Zambia, while debt restructuring negotiations finally kicked off this week, we suspect that getting a deal over the line will take some time. That and the decision to extend a subsidy scheme are likely to hold up the final agreement on the country’s IMF programme. World with Higher Rates - Drop-In (21st June, 10:00 ET/15:00 BST): Does monetary policy tightening automatically mean recession? Are EMs vulnerable? How will financial market returns be affected? Join our special 20-minute briefing to find out what higher rates mean for macro and markets. Register now

17 June 2022

Signs of Nigeria’s recovery decelerating further

The latest data from Nigeria suggest that the economic rebound slowed further at the start of Q2, and we think that the recovery will remain lacklustre over the coming quarters. The weakness of the economy may give monetary policymakers second thoughts about maintaining an aggressive pace of tightening. World with Higher Rates - Drop-In (21st June, 10:00 ET/15:00 BST): Does monetary policy tightening automatically mean recession? Are EMs vulnerable? How will financial market returns be affected? Join our special 20-minute briefing to find out what higher rates mean for macro and markets. Register now  

16 June 2022

SA Activity Data (Apr.) & Nigeria Inflation (May)

South Africa’s activity data for April showed that flooding in a key province and renewed power cuts dealt a big blow to industrial sectors, while retail sales held up well. GDP probably still contracted at the start of Q2 and we don’t expect a very strong rebound over the remainder of the year. Elsewhere, the latest jump in Nigerian inflation will keep pressure on the central bank to tighten monetary policy further.

15 June 2022
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Uninspiring politics in Nigeria, SA’s external position

Nigeria’s two main political parties have selected presidential contenders, setting the scene for a long campaign season ahead of elections in early 2023. Lots can happen until then, but with more market-friendly candidates out of the race, upside risks for the economic outlook are now slimmer. Elsewhere, we think that South Africa’s current account surplus in Q1 marked a turning point with the external position likely to deteriorate over the remainder of the year and the rand set to come under pressure.

Fuel levy in South Africa, primary season in Nigeria

The extension of a fuel levy cut in South Africa will help to contain fuel price pressures in the near-term, but the extra fiscal costs come at the same time that it looks like the government will have to concede ground to unions in public sector wage talks. Meanwhile in Nigeria, the main opposition party selected its presidential contender for the 2023 elections and, with the ruling party set to take its pick next week, election season will kick off in earnest. We are sending this Weekly two days earlier than usual because Capital Economics’ London office is closed on 2nd – 3rd June for the Queen’s Platinum Jubilee celebrations.

The monetary policy tide turns

African central banks have turned up their hawkish noises over the past month. Policymakers in Nigeria and Kenya delivered their first interest rate hikes following pandemic-era cuts. In South Africa, the Reserve Bank stepped up the pace of its tightening cycle and, in Ghana, MPC members voted for another chunky interest rate rise. Price pressures are mounting in these economies, with inflation rates close to, or surpassing, upper target bounds. The spillovers from the war in Ukraine are only going to push up inflation rates further over the coming months. Reining in inflation expectations probably played a key role in MPC decisions in South Africa and Kenya. And we suspect that policymakers in the latter and in Ghana and Nigeria also had an eye out for their currencies, which have been under pressure lately. The hawkish shift in Africa probably has some legs and we expect further monetary tightening in the coming months.

Nigeria’s economy and central bank chief under pressure

The rumours (subsequently denied) that Nigeria’s central bank governor had been sacked after delivering an interest rate hike raise further questions over the CBN’s independence. Even if the governor were to go, the country’s FX restrictions are likely to remain in place, at least until next year’s elections. In the meantime, the economy’s woes are becoming increasingly prominent. Low oil output is weighing on GDP growth and preventing Nigeria from taking advantage of high oil prices.

War in Ukraine inflames food insecurity in Africa

The outsize role of agriculture in Sub-Saharan African economies and the tendency to rely on imported food products makes the region particularly vulnerable to the agricultural shock caused by the war in Ukraine. In addition to the risk of food shortages, external – and in some cases fiscal – positions are set to weaken. The accompanying rise in inflation will add to the economic pain on the back of the conflict.

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