FX Week Ahead: Naira to hold firm on higher oil prices as Ghana focuses on export capacity building

Ghana focuses on export capacity building

The Cedi depreciated against the dollar last week, trading at 6.107 compared to 6.099 at last week’s close.

Ghana’s Trade and Industry Minister Alan Kyerematen said the country needs to increase its export capacity through industrialisation to create jobs.

Against that backdrop, Tullow Ghana took a developmental step by acquiring the first Ghanaian flagged marine vessel in a bid to boost capacity in the offshore oil and gas industry, reducing dependence on imports.

We anticipate a more positive mood in the FX market, with pressure on the Cedi likely to ease in the coming days.

Naira to hold firm on higher oil prices

The Naira strengthened against the dollar on the unofficial market this week, appreciating to 560 from 563.5 at last week’s close amid rising crude oil prices and reduced demand for the greenback.

Following the launch of the e-Naira in late October, the central bank said Nigerians have completed NGN46.3 million of transactions using digital currency.

Foreign exchange reserves fell for a second week, slipping to $41.6bn from $41.7bn seven days earlier. Given buoyant oil prices and the easing of dollar demand, we expect the Naira to hold steady in the coming week.

Mali faces sanctions as election plans stall

West Africa’s political and economic bloc ECOWAS has imposed travel bans and asset freezes on Mali’s transitional leaders after they told the regional alliance they would not hold presidential and legislative elections in February as previously promised.

The current interim government took power after the military removed President Ibrahim Boubacar Keita in August last year, giving assurances to ECOWAS that they would oversee an 18-month transition back to democracy.

A combination of the military coup, weak private investment and a fall in global commodity demand caused by the Covid-19 pandemic saw Mali’s economy contract by 2% in 2020, having grown 5.1% a year earlier.

As in Sudan and Guinea, on-going disruption caused by military takeovers threatens to derail post-COVID economic recovery.