Verto's FX Markets in Focus: Navigating African Currencies

The rapidly evolving currency and financial landscape of the African continent has always offered a blend of challenges and opportunities for B2B entities. This month's report sheds light on the recent happenings and projections in the currency market, particularly focusing on prominent African nations such as Nigeria and Kenya.

1. Currency Performance

Nigerian Naira (NGN)

• The recent times have seen an exceptionally low turnover in the I&E window, with the closing rate hovering below the 800 mark.

• A significant divergence can be observed in the parallel market, where the rates are oscillating between 860-880. This indicates a re-widening of the spread subsequent to devaluation.

Kenyan Shilling (KES)

• The Kenyan Shilling initially remained stable, reflecting positively on the country's fiscal budget reform and the subsequent rate hike. However, the currency has resumed its depreciative trajectory over the past weeks.

2. Market Developments

Nigeria

• While the inflation metrics might seem in line at first glance, they do not encompass the repercussions of the fuel subsidy removal and recent devaluation.

• Tinubu's government is frequently implementing ad-hoc policies. Notably, the declaration of a state of emergency on food producers raises eyebrows regarding its constitutional alignment. Moreover, a reduction in cash reserve requirements for banks has been observed.

• The political milieu remains uncertain, marked by a conspicuous absence of a new cabinet announcement. Despite his suspension, Emiefele persists as the CBN Governor.

Kenya

• The socio-political front of Kenya is tensing up, with accelerating political protests against Ruto’s administration. These movements are intensifying, escalating towards violence.

3. FX Regulatory Changes

Nigeria

• A significant shift in the regulatory framework has been observed, with CBN now allowing IMTOs to disburse NGN locally.

• The I&E Window appears troubled, with participants facing disruptions owing to unprecedented delays.

• While the absence of a Governor is notable, an MPC Meeting is on the horizon next week. Stakeholders should remain vigilant for potential rate hikes or a shift towards an alternative OMO strategy.

Kenya

• The regulatory scenario remains unchanged.