African economies have long been subject to the ebb and flow of global economic trends, and these currencies often reflect this volatility. In recent times, many African nations have experienced the weakening of their currencies, driven by various economic factors.
However, amidst this trend, Ghana and Tanzania stand out as beacons of stability, with the currencies of these countries holding firm. Meanwhile, the reasons behind the weakening of most African currencies and the factors contributing to the recent stability of Ghanaian Cedi and Tanzanian Shilling are not far-fetched.
Ghana’s currency, the Ghanaian Cedi (GHS), has demonstrated remarkable resilience despite the challenging economic environment. The country has made strides in managing fiscal deficits and implementing sound economic policies, which have contributed to the recent stability of the local currency.
Ghana has received support from international institutions like the IMF, which has helped stabilize its currency. This injection of foreign currency reserves can help stabilize a country’s exchange rate by increasing its foreign exchange reserves.
The IMF program required the country to implement economic reforms. These reforms included fiscal discipline, monetary policy adjustments, and structural changes that can help restore confidence in the local currency and improve economic stability.
Meanwhile, according to analysts, Ghana’s cedi is expected to be relatively stable next week due to easing demand for dollars from local corporates and some central bank intervention.
Pressure on the local unit has eased a tad in recent sessions. As such, it is expected that the local currency will hold fairly steady against the dollar in the coming weeks as corporate FX demand remains contained amidst increased support from the central bank.
Moreover, it has been relatively quiet on the interbank market last week, and the central bank has been active in providing support. Owing to that, experts expect a fairly stable cedi in the coming sessions.
Tanzania’s Steady Shilling
Moreover, Tanzania’s currency, the Tanzanian Shilling (TZS), has also maintained its stability for similar reasons. Tanzania’s economy is characterized by diverse sectors, including agriculture, mining, manufacturing, and tourism, reducing its vulnerability to external shocks.
Agriculture plays a crucial role in Tanzania’s economy, providing a stable source of foreign exchange earnings. The Tanzanian government has focused on implementing prudent fiscal and monetary policies to ensure currency stability.
That notwithstanding, other African countries currencies are expected to weaken. For instance, Kenya’s shilling is expected to weaken due to persistent demand for dollars from the manufacturing and energy sectors.
Commercial banks quoted the shilling at 149.80/150.00 per dollar, compared with previous closing rate of 148.85/149.05. The shilling’s present level – first touched on Wednesday – is a record low.
In Zambia, the kwacha will likely continue trading on the back foot against the dollar this week as demand for petroleum products weighs on its currency.
At the end of last week, commercial banks quoted the currency of Africa’s second-largest copper producer at 21.79 per dollar from 21.73 a previously. Meanwhile, the FX demand pipeline continues to grow, with significant appetite from the energy sector as it stocks up petroleum products.
In Nigeria, Nigeria’s naira could ease this week on the official and parallel markets after the currency hit record lows amid a central bank pledge to boost dollar supply in the market, which is yet to materialise.
The currency hit a record low of 1,155 naira to the dollar on the parallel market by the end of last week after it hit a new low of 999 naira on the official market. As the wide swing on the market continues, the silent of the Nigeria’s Central Bank is causing the naira to depreciate more. This depreciation, according to experts is likely to persist next week.
While many African currencies have faced depreciation in recent years due to external and domestic challenges, Ghana and Tanzania have maintained the stability of their respective currencies, the Ghanaian Cedi and Tanzanian Shilling. The key to their success lies in economic diversification, prudent fiscal management, attractive investment climates, and strong government policies. These countries serve as examples of how African nations can weather the storms of global economic fluctuations and maintain stable currencies, thereby fostering economic growth and development.