IN BRIEF
- GHANA
Fixed Income: The Ghanaian Treasury was unable to fully cover its gross T-bill target for October 2024 but successfully exceeded the maturities for the month. Notably, we observed a sharp decline in the average weekly T-bill targets against a modest softening in investor demand to limit the net uncovered auction. Yields continued the upshift with an average increase of 40bps across the T-bill curve in October. We observed the non-publication of Pricing Guidance to the market ahead of the T-bill auctions. This suggests a revised strategy to allow a more market-determined pricing, albeit with a likely internal cap on yields to guide the allotments. Ghana’s restructured Eurobonds traded at yields of between 8.9% – 10.3% on the Disco bonds and 9.6% on the Par bond (above the similar credit ZAMBIN curve) as investors priced-in the relatively lower cash flow on the Ghanaian securities.
Currency: - Depreciation pressure intensified on the Cedi in Oct-2024 as forex demand emerged, mainly from energy, commerce, and manufacturing sector firms to stock up ahead of the year-end festivities. Although the BOG sustained its FX sales on the weekly 7-day forwards (total: USD 279.5mn), the Cedi witnessed a faster depreciation of 3.0% m/m vs the USD as FX supply remained insufficient. Although external accounts have shown encouraging improvements so far this year, we also view the seasonal FX demand, election uncertainty, and the heightened GHS liquidity as potential depreciation risks.
KENYA
Fixed Income: Demand for Kenyan Treasury bills strengthened markedly in October 2024, particularly for the 182-day and 364-day tenors as investors moved up across the T-bill curve ostensibly to lock-in higher rates amidst the steady downshift in nominal yields. We also view the attractively high real yields amidst the stable KES as supporting the appeal of Kenyan Treasury bills amidst the lower interest rate outlook in advanced markets. However, we view the Central Bank’s benign near-term outlook on inflation as a signal for lower interest rates which will narrow the inflation premium on T-bills, barring the fiscal risk
Currency: The Kenyan Shilling defied the heightened political risk emanating from the impeachment proceedings against the Deputy President and the lingering fiscal risk, remaining static into Oct-2024. The Shilling stability is supported by remittance inflows, high real interest rates, and robust FX reserves at 4.4 months of import cover as the CBK turned a net-buyer of FX on the market. Although the IMF Board has approved Kenya’s 7th & 8th programme reviews with expected disbursement of USD 606.0mn, the Shilling’s static position in the past 2-months leaves us cautious of accumulated depreciation for the future.
NIGERIA
Fixed Income: The Nigerian Treasury Bill (NTB) primary market was quiet in October 2024 as the Treasury executed only one transaction instead of the fortnightly issuances. We believe the Central Bank’s intensified measures to tighten Naira liquidity amidst the inflation pressure have heightened the Treasury’s funding cost, restraining the frequency of NTB issuances. Primary market yields were generally stable along the front-end of the curve, albeit with a slight decline on the 364-day tenor. However, the secondary market T-bill yields reflected the tighter Naira liquidity with an average 275bps upsurge.Currency: The Naira depreciated by 8.0% m/m on the official (NAFEM) rate, rising above 1,670/USD while the parallel rate lost 2.5% m/m to 1,750/USD. Although this reflects the general seasonal depreciation pressure, we think the shaper depreciation on the official rate reflects a correction towards its market-clearing levels. The Central Bank remains resolute in its ongoing FX market reforms with the planned introduction of an Electronic Foreign Exchange Matching System (EFEMS) on 1st Dec-2024 after a 2-week test run in Nov-2024. We expect the EFEMS to enhance transparency and regulatory oversight in the FX market and support price discovery in the Naira exchange rate.