Naira at a 3-year low has further to fall

The crash in oil prices sent the Naira to its weakest level since 2017 in the parallel market to 450. We foresee further pressure on the Naira after last week’s 7% slide, as a result of declining export revenue combined with deepening economic fallout from coronavirus. Inflation edged slightly higher to 12.26% in March from 12.20% in February, driven by rising food prices amidst supply dislocations and the weakening local currency. The pursuit of dollars is exacerbated by demand from foreign investors unable to repatriate funds.

No let-up for worst EM currency as Rand slides

This year’s worst-performing emerging market currency depreciated a further 1.8% during the week to 19.14, hurt by reduced FX inflows and aggressive monetary policy easing in a bid to offset some of the coronavirus fallout. SARB has cut interest rates by 225 bps since the beginning of the year to mitigate a projected 6.1% contraction in the economy, spurring exits from the rand. Inflation fell to 4.1% in March from 4.6% in February as the lockdown reduced consumer demand. We see no let-up in pressure in the immediate term.

Further stimulus for Kenya as eyes turn to MPC

Amidst partial lockdown in cities, Kenya again stepped up stimulus measures with the Parliament approving a 5% cut in income tax for high earners and firms to 25%, coming on top of VAT cuts and other recent fiscal easing. The focus turns from the Parliament to the Central Bank with the MPC scheduled to meet in the coming week. The Shilling slid 0.5% over the week to 107.40 to the dollar.