Upcoming Currency Market Outlook for AZA Finance: 2022 Favors Senegal, Beyond Sports Success
🚀 African nations celebrate victories and EU investments
Africa is buzzing with excitement as Senegal claims its first win at the Africa Cup of Nations and the European Commission kicks off investments through their €300bn Global Gateway infrastructure plan.
The Lions of Teranga have their eyes on the future
After conquering the Africa Cup of Nations, Senegal finds itself in the global spotlight, taking center stage in Africa's development. With promising economic growth of 5.5% this year, according to the IMF, the West African nation continues to punch above its weight. President Macky Sall was recently elected as the Chairperson of the African Union, and investors are cheering on the "Lions of Teranga" for years to come.
Appetite for investment grows with Europe's Global Gateway
European Commission President Ursula von der Leyen has landed in Senegal as part of a continent-wide tour. Von der Leyen's focus is on tapping into the Global Gateway infrastructure plan, which pledges €150 billion for Africa until 2027. The initiative is geared towards developing sustainable infrastructure, digitalization, transport, energy, health, and education, ultimately reducing dependencies on regions such as China and Russia[3][5].
Green and digital investments on the horizon
This week, Ursula von der Leyen touched down in Dakar, where she discussed green and digital economic transition with Senegalese officials. The visit also included a signing ceremony at the Ndici Madiba Project, a plant to produce vaccines against COVID-19 and other diseases backed by the EU[2]. Further plans include funding for the new €238m Diamniadio Olympic Stadium, set to host the 2026 Youth Olympics. Moreover, €125 million has been earmarked for Covid vaccination programs[2].
Currencies across Africa face mixed fates
Elsewhere on the continent, the struggle for economic stability continues.
🇳🇬 Naira steady as oil receipts offset dollar demand
The Nigerian Naira stood firm against the dollar this week, trading at the 570 resistance level, as supply and demand remained evenly poised. Despite rising crude prices, Nigeria's FX reserves have dipped below the $40bn mark due to ongoing demand for the greenback[4].
🇧🇭 Cedi tumbles after Moody's 'junk' downgrade
The Ghanaian Cedi plummeted against the dollar, sliding to 6.375, following Moody's downgrading of Ghana's credit rating to Caa1 from B3. The government faces increasing challenges addressing its liquidity and debt, with weak revenue generation constraining budget flexibility[4].
🇿🇦 Rand gains with business confidence at 3-month high
South Africa's Rand strengthened against the dollar this week, appreciating to 15.26, as business confidence reached a three-month high amid optimism about the Omicron Covid-19 variant[4].
🇪🇬 Egyptian Pound stable as UAE bank eyes EFG stake
The Egyptian Pound held steady at around 15.71 to the dollar, as UAE's First Abu Dhabi Bank offered to buy a majority stake in Egypt's largest investment bank, EFG Hermes[4].
🇰🇪 Kenyan Shilling vulnerable to rising oil and election
The Kenyan Shilling traded steadily against the dollar, with dollar demand from importers countered by supply[4]. The Kenyan government's efforts to cap electricity and fuel prices have helped to tame inflation, but the elections in August could put pressure on the Shilling again[4].
🇺🇬 Pipeline funding to help stabilize Ugandan Shilling
The Ugandan Shilling depreciated against the dollar as import activity picked up following the relaxation of Covid-19 restrictions[4]. Inflation rates are decreasing, while the East African Crude Oil Pipeline project enters its fundraising stage, which should support a stable Shilling in the near term[4].
🇸🇿 Tanzanian Shilling steady as debt jumps by a fifth
The Tanzanian Shilling remained broadly stable against the dollar, with inflation edging lower in January to 4%[4]. Government borrowing to fund infrastructure projects continues to increase the national debt, but it is hoped that this investment will improve the overall business environment and result in a more stable Shilling[4].
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_{[1] European Commission's Global Gateway (https://ec.europa.eu/info/strategy/recover-to-grow/eu4-infrastructure/global-gateway_en) [2] Senegal welcomes European Commission President Ursula von der Leyen (https://www.africanews.com/2022/01/24/senegal-welcomes-european-commission-president-ursula-von-der-leyen/) [3] EU targets €150bn in investment for Africa through Global Gateway infrastructure plan (https://www.reuters.com/business/africa/eu-targets-150bn-investment-africa-through-global-gateway-infrastructure-plan-2021-10-23/) [4] Africa currency brief: Naira steady; Cedi tumbles; Rand gains; Egyptian Pound stable; Kenyan Shilling vulnerable; Ugandan Shilling depreciates; Tanzanian Shilling steady (https://www.reuters.com/markets/currencies/africa-currency-brief-naira-steady-cedi-tumbles-rand-gains-egyptian-pound-stable-kenyan-shilling-vulnerable-ugandan-shilling-depreciates-tanzanian-shilling-steady-2022-02-01/) [5] EU to invest €664 million for Africa's sustainable infrastructure (https://eeas.europa.eu/headquarters/headquarters-homepage/66108/eu-invest-664-million-africas-sustainable-infrastructure_en)}
- The Lions of Teranga, now in the global spotlight, are being cheered on by investors for years to come due to the promising economic growth and their recent victory at the Africa Cup of Nations.
- European Commission President Ursula von der Leyen is focusing on tapping into the Global Gateway infrastructure plan, which pledges €150 billion for Africa until 2027, with a goal to develop sustainable infrastructure, digitalization, transport, energy, health, and education.
- Green and digital economic transition discussions took place between Ursula von der Leyen and Senegalese officials, with plans including funding for the new Diamniadio Olympic Stadium and €125 million for Covid vaccination programs.
- Elsewhere across Africa, currency fates are mixed. The Nigerian Naira stood firm against the dollar due to even supply and demand, but Nigeria's FX reserves have dipped below the $40bn mark due to ongoing dollar demand.
- In Ghana, the Cedi plummeted against the dollar following Moody's downgrading of Ghana's credit rating to Caa1 from B3, as the government faces increasing challenges addressing its liquidity and debt.
- South Africa's Rand strengthened against the dollar thanks to a three-month high in business confidence amid optimism about the Omicron Covid-19 variant.
- The Egyptian Pound held steady as UAE's First Abu Dhabi Bank offered to buy a majority stake in Egypt's largest investment bank, EFG Hermes.
- In Uganda, the East African Crude Oil Pipeline project is entering its fundraising stage, which should help stabilize the Ugandan Shilling in the near term, while the Tanzanian Shilling remained stable with inflation edging lower in January, despite an increase in national debt due to infrastructure investments.
