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Nigeria’s exchange rate: changing tack? Rumours are growing that Nigeria’s government is mulling a proposal to unify the country’s exchange rates, which essentially appears to entail allowing the official exchange rate (at around 360/$, which is used to …
19th June 2020
Inflation rising slowly but surely The slight increase in Nigerian inflation in May, to 12.4% y/y, will probably be followed by further rises over the coming months, but we still think that more interest rate cuts lie in store later this year. Figures …
17th June 2020
Fiscal (un)realities in Nigeria Nigeria’s revised budget for 2020 is one step closer to approval, but we suspect that the deficit will be higher than the government estimates. Both chambers of the parliament passed the revised budget blueprint this week, …
12th June 2020
Early evidence suggests that the coronavirus and South Africa’s lockdown measures are taking a heavy toll on the economy and supports our view that the economy will decline sharply over the year as a whole. Our forecast is for a contraction of 11.0%, …
11th June 2020
Even after further easing of South African lockdown measures last week, a quarter of the economy remains closed. And the impact of the lockdown on unemployment and insolvencies will cause long-lasting economic damage that will hold back the recovery. We …
10th June 2020
Angola looks to restructure Angola’s debt problems finally seem to be surfacing. We’ve noted before that its public debt problem is, along with Zambia’s, one of the most acute in the region. (See here .) The government debt ratio was expected to breach …
5th June 2020
A look at South Africa’s recent history would suggest that the monetary easing cycle has further to run. We now expect an additional 75bp of cuts in the coming months, taking the repo rate from the current 3.75% to 3.00% by year-end. This is more …
2nd June 2020
Manufacturing sector coming back to life The rise in the business activity component of South Africa’s manufacturing PMI shows that conditions in the sector improved in May, having come almost to a standstill in April. With manufacturing allowed to fully …
1st June 2020
Debt talks moving forwards The past week has brought private sector debt relief for the region a step closer. Zambia hired advisors to help its restructuring talks. This was prompted by the IMF, which has made Zambia’s request for emergency financial …
29th May 2020
Governments across much of Sub-Saharan Africa have moved towards lifting coronavirus containment measures in recent weeks but, with the exception of South Africa, this has much more to do with economic concerns than success in controlling the virus’ …
We think that today’s 100bp interest rate cut by the Nigerian central bank, to 12.50%, will be followed by further loosening as economic recovery proves weaker than the central bank expects. We have pencilled in an extra 50bp cut, most likely at the …
28th May 2020
This Update answers five questions we are asked most frequently on sovereign debt risks in Sub-Saharan Africa. While there are lots of factors at play, it seems likely that governments in much of the region (South Africa being a key exception) will …
26th May 2020
SA: Downturn starting from a point of weakness South Africa’s usual run of activity figures is behind schedule due to the lockdown. (See here .) The data for February, published this week, were of course outdated. But they showed that the economy was …
22nd May 2020
South African policymakers continued to cut interest rates today, taking the repo rate down by 50bp to 3.75%, but the end of the easing cycle appears to be on the horizon. At this stage, we expect one more cut, of 25bp, to 3.50%. With the eventual …
21st May 2020
We think that Nigerian policymakers will have to allow the naira to weaken further in order to address mounting strains in the balance of payments. But hopes of a unified, flexible exchange rate regime will probably be dashed. Nigeria’s external position …
19th May 2020
Nigeria’s budget saga continues The amendments to the 2020 budget approved by Nigeria’s cabinet this week suggest that the government is not yet fully facing up to the fiscal damage caused by the coronavirus. The authorities revised the budget for the …
15th May 2020
South Africa’s public debt ratio will rise sharply this year and it would take an implausible degree of austerity or reduction in borrowing costs to stabilise the debt ratio in the following years. A debt crisis isn’t imminent, but it could be …
12th May 2020
Lifting lockdowns to lessen economic pain After relatively early action to impose containment measures, more and more African countries are relaxing restrictions. Given patchy data on cases of Covid-19, it’s hard to tell whether the infections curve has …
7th May 2020
Low-profile data suggest that the economic damage caused by lockdowns in some of the poorer economies in Africa will be more moderate than in higher-income countries. But the economic pain could be more protracted in the former group of countries as they …
6th May 2020
Manufacturing sector to wake up only gradually from April standstill The business activity indicator of South Africa’s manufacturing PMI crashed to just 5.1 in April, highlighting the severity of the country’s lockdown. With the lockdown now easing, …
4th May 2020
Rumours of private sector debt relief There seem to be growing moves towards some form of relief on debts owed to private creditors for low-income African economies. Several paths have been outlined in recent days. One suggestion is that private creditors …
1st May 2020
The risk of further sovereign defaults has risen across the region this month. Rwanda has joined Zambia in seeking to restructure its sovereign debt. And the collapse in oil prices will put more pressure on already fragile external and fiscal positions in …
30th April 2020
One consequence of the current crisis is that bad loans in Nigeria’s banking sector are likely to rise sharply. While the government would surely respond to problems at individual banks with capital injections (as it did in 2009), this would add to the …
28th April 2020
S. Africa’s fiscal stimulus: better late than never The news in South Africa this week has been dominated by the government’s announcement of a fiscal package to support the economy as well as details of easing lockdown measures from 1 st May. The fiscal …
24th April 2020
Overview – Sub-Saharan Africa is set for one of its worst downturns in decades this year. The hardest hit economies are likely to be South Africa (due to its stringent lockdown measures), the large oil producers (Nigeria and Angola), and tourism dependent …
The plunge in global oil prices has raised the risk of much steeper contractions in output in African oil producers, sharper currency falls, sovereign debt restructurings and problems at local banks. Among the major economies in the region that we cover, …
22nd April 2020
More easing on the cards as inflation softens The larger-than-expected fall in South African inflation, to 4.1% y/y, in March will give the central bank more room for manoeuvre. Although yesterday’s announcement of a fiscal package by the government …
The 10% of GDP emergency fiscal response announced by South Africa’s president last night will help to alleviate some of the strains in the economy caused by the lockdown. But with this coming one month after lockdown started, a lot of damage will already …
Rate cut on the horizon despite rise in inflation The slight rise in Nigerian inflation in March, to 12.3% y/y, is unlikely to prevent policymakers from cutting their key rate in May to ease the country’s economic pain caused by the coronavirus. Figures …
21st April 2020
Debt relief on the cards The agreement by the G20 to allow low-income economies to suspend debt payments on bilateral loans this week will take one piece off African policymakers’ plate of economic challenges. Even so, their figurative plates remain …
17th April 2020
Coronavirus: latest on cases & containment This week the tally of coronavirus cases in Sub-Saharan Africa continued to increase, with some policymakers tightening restrictions further. But there are reasons to think that lockdown measures will be less …
9th April 2020
South Africa’s ongoing three-week lockdown means the statistics agency won’t be publishing or collecting data during this time. In this Update , we explain what other data we should look at, what would happen if the lockdown is extended and the …
An increasing number of African governments have imposed lockdowns in an effort to fight Covid-19, but we think the risk that such restrictive measures fail to contain the outbreak is bigger in the region than in other parts of the world. The science of …
6th April 2020
South Africa: Rand on the ropes The South African rand’s slide to record lows this week will probably continue over the coming weeks as risk-off sentiment persists. But the currency will probably rebound later this year as signs of a global recovery from …
3rd April 2020
The coronavirus and low commodity prices are putting pressure on most African economies’ balance of payments positions and pushing many sovereigns closer to default. Besides Zambia, which is already moving towards debt restructuring, the risks are highest …
2nd April 2020
Stronger-than-expected PMI is a misleading indicator South Africa’s PMI jumped in March, but only due to a statistical quirk in the compilation process. The underlying data suggest that the economy was, in fact, weakening even before the recent lockdown. …
1st April 2020
Given the scale of ongoing global market turbulence, Moody’s decision to strip South Africa of its last investment grade rating will have less immediate effect than some had feared. That said, the country’s already grim debt outlook has deteriorated …
30th March 2020
Containment policies tighten…. The 21-day lockdown that took effect on 26 th March in South Africa is the most aggressive containment policy yet tried in any major African economy, but policymakers elsewhere in the region have also been imposing new …
27th March 2020
The rapid pace of the economic and market disruptions caused by the coronavirus mean that data released in recent months probably offer little insight into the current state of African economies. Accordingly, this publication will focus on the most timely …
26th March 2020
President Cyril Ramaphosa’s decision to emulate the lockdowns seen in Europe and East Asia will cause GDP to fall by 6-8% in Q2. It will also be the first real test of whether such policies can be implemented effectively in low income countries. The South …
24th March 2020
The controlled devaluation of the naira will help to preserve Nigeria’s scarce FX reserves and encourage foreign investment inflows. Given, however, that officials opted to maintain a dual-track system, we expect that the FX regime will remain complex and …
23rd March 2020
Coronavirus: African outbreak spreading Figures released this week suggest that the coronavirus outbreak in Sub-Saharan Africa spread rapidly this week. Officially confirmed cases more than tripled. While South Africa has the largest number of confirmed …
20th March 2020
It now seems clear that the coronavirus outbreak will cause greater economic damage than we had initially thought – both globally and within Africa. Growth will slow across the region, with South Africa and tourist-dependent economies like Mauritius …
19th March 2020
South African policymakers appear to have decided that the current grave economic situation requires a bold response, and have moved away from their traditional hawkishness. We expect that they will follow today’s 100bp cut with another 75bp of loosening …
Activity data from January suggest that the economy was already contracting before the coronavirus reached South Africa. The outbreak will add to economic headwinds. Policymakers are likely to spring into action by cutting their key rate on Thursday, but …
18th March 2020
Africa: Coronavirus cases contained, for now The number of confirmed coronavirus cases in Sub-Saharan Africa more than doubled this week, but there are still fewer confirmed cases in the billion-person region than in the US state of Massachusetts. …
13th March 2020
Early signs suggest that economic conditions improved at the start of Q1, but disruptions caused by the coronavirus make it likely that output will have fallen later in the quarter and going into Q2. We expect that the SARB will cut its key policy rate …
12th March 2020
Risk-off sentiment has already battered the rand, but we think that the Nigerian naira and Angolan kwanza will both fall further later this year when policymakers are forced to accept painful devaluations. The kwanza will probably fall furthest, adding to …
11th March 2020
The coronavirus will probably continue to spread in Africa, but the biggest economic hit will come from lower oil prices. Indeed, Angola may suffer a bigger fall in GDP than anywhere outside the worst-affected Asian countries. Predicting the future …
9th March 2020
Coronavirus: Counting the costs in Africa The accelerating spread of the coronavirus has prompted us to update our African economic forecasts. We’ll publish final numbers after today’s OPEC+ meeting gives us a clearer sense of global oil prices, but we …
6th March 2020
