13 July 2018 ( Lagos ) : In analyst's H1 18 strategy report, analysts had posited that higher proceeds from commodity export will leave currencies stable thereby keeping a tight lid on inflation. True to that, most countries in SSA saw improved current account balance following sustained upsurge in commodity prices. In addition, Eurobond issuance (H1 18: $12.7 billion) also supported the balance of payment picture. 

Against that backdrop, most SSA’s currencies strengthened over Q1 18. Specifically, improved external balance drove currency appreciation in South Africa (+4.4%), Ghana (+3.7%) and Kenya (+1.9%) over the period, while Naira was flat (+0.3%) as improved oil proceeds helped maintain currency stability over the period. 

However, many SSA currencies depreciated over Q2 18 as the impact of rate normalization in the U.S prompted recent EMs assets sell-offs - South Africa (-6.8%), Nigeria (-0.35%) and Ghana (- 4.6%).

Away from SSA, Iran’s currency crisis worsened with Rial losing 23% of its value over H1 18 following the withdrawal of President Trump from the Iran nuclear deal. The dollar illiquidity drove a 43% premium between official and parallel market rates.

To stem the scale of things, Iranian government, in April, set the official rate at 42,000/$ and instilled control measures on FX demand6. Elsewhere, analysts saw stability across other countries with Saudi government seemingly hell bent on defending its currency amidst pressured fiscal position while Egyptian pounds (H1 18: -0.3%) continued to reap the pecks of FX liberalization.

Reporting for EasyKobo on Friday, 13 July 2018 in Lagos, Nigeria

Source: ARM Securities Limited

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