{"id":3643,"date":"2021-10-15T00:00:00","date_gmt":"2021-10-15T00:00:00","guid":{"rendered":"https:\/\/staging.azafinance.com\/2021\/10\/15\/trade-finance-deals-to-drive-african-sme-growth\/"},"modified":"2021-10-15T00:00:00","modified_gmt":"2021-10-15T00:00:00","slug":"trade-finance-deals-to-drive-african-sme-growth","status":"publish","type":"post","link":"https:\/\/azafinance.com\/trade-finance-deals-to-drive-african-sme-growth\/","title":{"rendered":"Trade finance deals to drive African SME growth","gt_translate_keys":[{"key":"rendered","format":"text"}]},"content":{"rendered":"

The African Development Bank has laid out plans to support the growth of the continent\u2019s free trade area by guaranteeing loans worth $7 billion over the next five years to help companies sell their products across Africa. That follows Afreximbank\u2019s pledge earlier this year to make available $40 billion to boost intra-African trade over the same period. This type of financial support is much needed to spur economic growth within countries signed up to the African Continental Free Trade Area, in particular helping small and medium-sized companies as they seek to bounce back from the impacts of the coronavirus pandemic.<\/p>\n

Seven-year oil high to bolster Naira<\/strong><\/h4>\n

The Naira depreciated against the dollar this week, sliding to 573 on the unofficial market from 570 at last Friday\u2019s close. That weakness comes even as Nigeria\u2019s foreign exchange reserves continue to grow, rising to $38.4 billion at the end of last week, according to the Central Bank of Nigeria\u2019s 30-day moving average reserves data. Earlier this week, the country\u2019s Vice President Yemi Osinbajo called on the central bank to \u201clet the Naira be as reflective of the market as possible to boost supply,\u201d stating that the currency is artificially overvalued, which is discouraging foreign capital inflows. That is in stark contrast to the views of President Muhammadu Buhari, who has consistently spoken out against a devaluation of the Naira. With oil prices at a seven-year high continuing to boost the country\u2019s export earnings, we expect the Naira to find support around the 570 level.<\/p>\n

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Bank of Ghana stepping up Cedi support<\/strong><\/h4>\n

The Cedi depreciated slightly against the dollar this week to 6.065 compared to 6.053 at last week\u2019s close. That mild weakening came despite the expected tranche disbursements of the $1.5 billion cocoa loan facility, with half of that entire funding set to hit the Ghana Cocoa Board account this month. The country\u2019s central bank continues to support the market via its fortnightly forward FX auctions; in the last quarter alone it sold $300 million across its bi-weekly auctions\u2014roughly double the volume in the previous quarter. More support is expected as FX demand increases during the upcoming festive season, and we anticipate that will help strengthen the Cedi in the coming months.<\/p>\n

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\nCommodity prices upswing lifts Rand<\/strong><\/h4>\n

The Rand appreciated against the dollar this week, trading firmer at 14.81 from 14.94 at last Friday\u2019s close, boosted by an increase in commodity prices including key exports such as gold and platinum. Declining US treasury yields also revived appetite for emerging market currencies more broadly, helping the Rand recover from a low of 15.07 at the start of the week when the country was gripped by inflation concerns. We expect the stronger commodity prices to help prop up the currency in the coming week.<\/p>\n

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\nGreen finance inflows to keep Pound steady<\/strong><\/h4>\n

Egypt\u2019s Pound was unchanged against the dollar this week, trading at 15.65\/15.75. The economy is forecast to grow 3.3% this year, according to the IMF, up from its previous forecast of 2.5% in April. The IMF projects GDP growth will hit 5.2% next year and 5.8% by 2026. Egypt this month signed loan facilities worth $2 billion to help finance green projects in the country; it is also expected to issue more sovereign green bonds, having become the first nation in the Middle East and North Africa to sell such debt last year. We expect to see a stable pound this coming week with support from investor inflows.<\/p>\n

Pressure on Kenyan Shilling set to persist<\/strong><\/h4>\n

The Shilling depreciated slightly this week, trading at 110.85\/ 111.15 compared with 110.55\/ 110.85 at last week\u2019s close, amid increased dollar demand from importers. Pan-African credit rating agency Agusto & Co. this week affirmed Kenya\u2019s rating at B+, describing its debt situation as \u2018moderately high risk\u2019. The agency forecast that the country\u2019s economy will grow 3.8% this year, significantly lower than the IMF\u2019s estimate for 5.6% GDP growth. Kenya\u2019s foreign exchange reserves stood at just shy of $9.4 billion last week, adequate for 5.73 months of import cover. We expect the Shilling to remain under pressure over the coming seven days due to higher oil prices and sustained dollar demand from importers.<\/p>\n

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Ugandan Shilling poised for further weakness<\/strong><\/h4>\n

The Shilling slipped to 3590\/3600 from 3555\/3565 at last week\u2019s close amid increased interbank demand for dollars. An effort from Uganda\u2019s central bank to support the currency by selling dollars into the market was not enough to arrest the slide. The central bank also this week held a UGX 200 billion treasury bill auction with 91-day, 182-day and 364-day tenors. We expect the Shilling to remain under pressure in the near term due to increased demand for the greenback.<\/p>\n

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Tanzanian Shilling outlook buoyed by IMF cash<\/strong><\/h4>\n

The Shilling traded flat against the dollar this week at 2300\/2310, mainly cushioned by inflows into the country. The IMF this week released the $576 million COVID relief loan it approved for Tanzania early last month. The funds will be used to implement development projects in sectors such as education, water, health and tourism that have been affected by the coronavirus pandemic. The IMF forecasts that Tanzania\u2019s GDP growth will hit 4% this year and 5.1% in 2022. We expect the Shilling to gain support in the near term from investor inflows and agricultural exports, notably coffee.<\/p>\n

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Issued by AZA Finance. This Newsletter is produced as a service to our clients. It is prepared by our dealing professionals and is based on their understanding and interpretation of market events. AZA Finance cannot be held responsible for any losses of whatever nature sustained as a result of action taken based on comments contained in this publication.<\/em><\/p>\n","protected":false,"gt_translate_keys":[{"key":"rendered","format":"html"}]},"excerpt":{"rendered":"

The African Development Bank has laid out plans to support the growth of the continent\u2019s free trade area by guaranteeing loans worth $7 billion over the next five years to help companies sell their products across Africa. That follows Afreximbank\u2019s pledge earlier this year to make available $40 billion to boost intra-African trade over the […]<\/p>\n","protected":false,"gt_translate_keys":[{"key":"rendered","format":"html"}]},"author":1,"featured_media":3644,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[19],"tags":[],"class_list":["post-3643","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-fx-insights"],"acf":[],"gt_translate_keys":[{"key":"link","format":"url"}],"_links":{"self":[{"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/posts\/3643","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/comments?post=3643"}],"version-history":[{"count":0,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/posts\/3643\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/media\/3644"}],"wp:attachment":[{"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/media?parent=3643"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/categories?post=3643"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/tags?post=3643"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}