Core Lines



  • 21 September: Mauritius July trade balance. Monday will be light in terms of data releases, with this sole publication expected out of Mauritius. Just like other macro variables, including GDP and inflation, trade activity has been heavily impacted across the region due to the coronavirus pandemic. The sources of disturbance span from containment measures implemented to mitigate the spread of the virus to weakness or collapse in demand. The hit from Covid-19 has however seen diverse outcomes on the balance of trade over the first six months of 2020, from much more larger deficits (e.g. Nigeria and Botswana) to atypically large surpluses (e.g. South Africa and Zambia). In Mauritius, where the statistics agency will publish data today, exports and imports were both down 17.8% y/y in June. In our calculations, exports fell 21.1% y/y in H1 while imports contracted 16.8% resulting to a smaller trade deficit of about MUR47bn in the period. In H1 2019, the deficit was MUR54.9bn. July’s data will bring more information to the table on the evolution of trade in the country, with a bias for a smaller trade deficit in the month. Although the trade deficit is narrowing so far in 2020, the hit in the current account will be from lower surpluses in the services and income accounts. The Bank of Mauritius estimated in July that the CA deficit could deteriorate sharply to 13.5% of GDP this year (-5.5% in 2019).  
  • 22 September: Nigeria’s CBN rate decision; SARB business cycle indicators. Given rising inflation and lingering pressures on the naira, might the CBN surprise with policy tightening? The chances of that are very slim considering the gist of CBN policy in recent past and the times we are in. It will be straight-forward for the MPC to argue that inflation is primarily being driven by supply factors (side note*: many induced by domestic policy choices) and that the two adjustments on the official naira rate have been handy in partly addressing FX market dislocations. At 13.2% y/y (and rising) in August, headline inflation is well outside of the CBN’s preferred range of 6-9% and has been so since mid-2015 (so this situation is not abnormal). In its own projections, the CBN sees inflation increasing to slightly over 14% by year-end. Seeing that inflation has not been the major driver of CBN policy, what has been? Discernibly, reading from its actions over multiple months, supporting lending to the real economy has been at the fore. This can be observed through the institution of the compulsory minimum 60% loan to deposit ratio from 3 July 2019 (later raised to 65%), the bank’s several credit facilities (some augmented and others introduced due to Covid-19-related developments) and the bank’s policies (e.g. restricting OMO bills to offshore and banks only from late 2019) which have been instrumental in the sharp decline in market interest rates. When the MPC met it July, it highlighted improved take-up in its credit facilities and that its LDR initiative had boosted credit extension by about NGN3.3trn in 12 months. Given that real rates are deeply in the red, there is a question surrounding misallocation of capital which we leave for another day. From the above, it is noteworthy that the CBN’s drive to compel (not just encourage) greater credit growth was already in play pre-pandemic, in an economy which was expanding at around  2.0% y/y versus the Q2 rate of -6.0% y/y. Aside boosting credit growth, the CBN’s other main pre-occupation is fostering stability of the naira. Deterioration in fundamentals (a much higher inflation differential, a swing in the trade balance to a sizeable deficit, collapse in portfolio inflows etc) has meant that naira devaluation has been inevitable. The bank has adjusted the official naira exchange rate weaker to 360/USD (from 305/USD) then to 380/USD so far this year. The oil price shock this year was merely the ‘snowflake that triggered the avalanche’ given that the naira has been overvalued for some time in our take. While the adjustment took the official rate closer to the IEFX rate, the naira continues to trade at much weaker levels in the parallel market (currently at about 465/USD). All in all, today’s meeting could be another one where the committee members come together to digest and interrogate incoming data, then subsequently leave more time to assess the evolving impact of its policy actions. Even though it becomes increasingly difficult to run an open economy with multiple exchange rates, surrendering the naira to market forces and moving to a single naira rate does not appear a step that the CBN is willing to take any time soon. In South Africa, the SARB’s composite business indicators are scheduled for release. The focus will be on the leading BCI which was down 9.1% y/y in June, contracting for a twentieth consecutive month.       
  • 23 September: Mauritius rate decision and Q2 balance of payments; Nigeria’s September CBN PMI (expected). We expect the Bank of Mauritius to remain on hold, by once again keeping the policy rate unchanged at the record low of 1.85%. In July, the MPC deemed that the current monetary stance was ‘appropriate’ as it would help to revive growth and mitigate the impact of Covid-19 on the economy. The incoming and forecast macro numbers are telling about the effects of the pandemic. While inflation remains moderate (August: 1.5% y/y), the country’s all-important tourism sector has been hit particularly hard even as the phased re-opening of international travel suggests that the worst may be in the past. Tourist arrivals rose to 317 in August, improving from the total of 84 in April to July, but still way below the levels seen last year (August 2019: 107275). With broad effects from the Covid-19 shock, the BoM noted in July that real GDP could contract by about 12.5% this year while the current account deficit could surge to 13.5% of GDP. The CA deficit was 4.2% of GDP in Q1 and the central bank will publish numbers for Q2 today. The GDP growth outturn for Q2 will be known at the end of the month. In Nigeria, we expect the CBN to publish its manufacturing and non-manufacturing PMIs. The indices have risen from their pandemic-induced lows but remained in contraction territory at 48.5 and 44.7 respectively in August. The September figures will shed some light on the strength of the recovery after GDP growth fell to -6.0% y/y in Q2 from a 2.0% expansion in Q1.  
  • 24 September: Zambia’s September inflation and August trade balance; Namibia’s Q2 GDP. Headline inflation (August: 15.5%) is expected to ease to about 15.0% y/y, influenced by continued moderation in food price pressures. That said, the outlook remains murky with the headline rate likely to remain well outside of the 6-8% medium-term target into 2021. This is due to the sharp depreciation of the kwacha as well as the running effects of higher fuel and electricity prices administered earlier this year. Housing and transport inflation stood at very high rates of 18.8% y/y and 33.9% in August. A sustained decline in food inflation will also be crucial in ensuring continued disinflation in upcoming quarters. While inflation remains well outside the policy target, monetary policy has been geared towards helping the economy mitigate the effects of the Covid-19 crisis. The Bank of Zambia opted to reduce its policy rate by a further 125bp in August, taking it to the lowest level since the benchmark rate was introduced in April 2012. The Bank noted significant worsening in economic conditions and itself acknowledged that inflation was likely to decline steadily to reach the upper end of the policy range only in Q2 2022. The easing of monetary conditions added to the bearish bias on the ZMW which has depreciated to record weak points. The dismissal of (former) BoZ Governor Kalyalya by President Lungu after the August MPC sitting further unsettled market players. With sustained pressure on the kwacha in recent weeks, the central bank issued a statement on 15 September regarding developments in the FX market. The Bank highlighted that the exchange rate has an ‘important impact on inflation outcomes’ and noted that it will use all options available (policy and intervention) to address the adverse developments in the market. The Bank’s ability to intervene directly remains highly constrained (FX reserves at USD1.4bn, barely covering 2 months of imports) which implies that policy actions could be in the offing to help stem the kwacha’s fall. Although the kwacha’s depreciation is conducive to raising inflation risks, the impact of this on trade has been a textbook case. Notwithstanding the added effects of Covid-19, exports have risen in kwacha terms so far this year despite lower average copper production and prices. Over January to July (cummulative), exports were 25.5% y/y higher while imports are 4.8% lower. Alongside the September CPI, the statistics office will also publish August numbers which will shed further light on developments.
  • 25 September: Zambia’s 2021 Budget; S&P ratings update on Ethiopia; Botswana’s July trade; Seychelles rate decision (expected). All eyes will be on Finance Minister Ng’andu when he delivers the country’s 2021 budget. While there are many competing demands on the Minister’s table, especially as the economy looks to navigate its way through the headwinds of Covid-19, top of mind for investors will be debt. Precisely, more detail on how the country aims to reign in its unsustainable debt trajectory. The government has already resumed negotiations with creditors to restructure its external debt and has requested support under the G20 Debt Service Standstill Initiative. Annual debt service requirements already exceed available FX reserves, implying that the country would be on course to default in absence of a reprofiling of its external debt. The country has already fallen temporarily in default on its obligations to a multilateral agency in late 2019 while credit ratings squarely reflect elevated default risks on government bonds (S&P: CCC; Moody’s: Ca; Fitch: CC). The economy is set to experience outright recession this year while government debt is on course to exceed 100% of GDP (more than half of it being external). Similar to majority of countries in SSA, the Covid-19 crisis has forced the Zambian government to request emergency financial support from the IMF (negotiations still ongoing and no disbursement has yet been  made) though a conditionality-based program would perceptibly underpin a more comprehensive debt restructuring. Importantly, this will be an election year budget which adds further complications on needed fiscal consolidation. As regards Ethiopia, S&P’s upcoming update may come with the downgrade of the ratings which currently stand at B/B. The agency changed the outlook on the ratings to negative in April, citing rising pressure on debt and the external position. Ethiopia’s long-term FX ratings are the same (B or B2) across the three major rating agencies, with the outlooks all negative. In Botswana, reduced external demand and the protracted Covid-19-related lockdown has had a severe impact on trade. Exports (c. 90% diamonds in 2019) were sharply lower in Q2 compared with previous years. Over H1, exports shrunk 45.8% y/y while imports were 9.9% lower, translating to a sizeable trade deficit of BWP13.6bn (the deficit in H12019 was BWP2.2bn). The July numbers will give some colour on the path to recovery of foreign trade and the economy at large. Today, we also expect the Central Bank of Seychelles MPC to hold its quarterly meeting. The committee reduced its benchmark rate to 3.00% in June and gave headroom for the reserve ratio to be reduced by 3pp dependent on liquidity conditions.


  • Treasury bills: Uganda (23-Sep), Kenya (24-Sep), Zambia (24-Sep), Namibia (24-Sep), Ghana (25-Sep), South Africa (25-Sep), Mauritius (25-Sep)
  • Treasury bonds: South Africa (22-Sep), Nigeria (23-Sep), Tanzania (23-Sep)


  • Monday, 21 September: Ghana
  • Thursday, 24 September: South Africa
  • Friday, 25 September: Mozambique


  • Angola: The IMF Executive Board approved a further USD1bn to Angola under the economic program which was agreed in December 2018. Cummulative disbursements under the three-year USD3.7bn program now total USD2.5bn. The Fund also approved augmentation of access under the program by USD765mn to support the country’s Covid-19 response. Program implementation thus far was viewed as ‘broadly satisfactory’. Separately, headline inflation printed at a 30-month high in August (22.8% y/y), amid elevated food inflation and lagged effects from the depreciation of the kwanza. The national rate was 23.4% y/y.           
  • Botswana: S&P changed the outlook on its BBB+/A-2 ratings on the country to negative from stable, on rising fiscal and external pressures. The latest rating action comes after a one notch downgrade in March 2020. Meanwhile, headline inflation remained at a historically low level in August, coming in at 1.0% y/y (July: 0.9% y/y). Botswana’s inflation has been at or below the 3-6% objective range since April 2020. In its August 2020 MPR, the Bank of Botswana indicated that inflation could return to within this range in Q3 2021.
  • Ghana: Real GDP shrunk 3.2% y/y in Q2 after an expansion of 4.9% in Q1, showing the effects of the Covid-19 shock. This was the first negative growth reading since 2016. The secondary sector saw the biggest contraction at -5.7% y/y, followed by services at -2.6%. Agricultural output rose 2.5% y/y. While Ghana’s growth is set to be sharply lower in 2020, the country is broadly expected to escape outright recession. The next set of national accounts data will be out on 23 December. The GSS also published August PPI numbers which showed a slightly lower headline rate of 9.0% y/y.
  • Namibia: After a three-month stay at 2.1% y/y, CPI inflation rose to 2.4% in August. The main drivers of the increase were higher transport (1.2% y/y from -1.2% in July) and food (6.8% y/y) inflation. Housing inflation was unchanged at -1.5%. Considering the latest outcomes, Namibia’s inflation is on track to average below 3% this year.
  • Nigeria: Headline inflation reached the highest level in nearly two and a half years, printing 13.2% y/y in August (July: 12.8%). Food inflation jumped to 16.0% y/y (July: 15.5%) while core inflation (CPI less farm produce) increased to 10.5% y/y (from 10.1%). The CBN noted in a recent report that inflation could rise to 13.97-14.15% in December 2020. The Bank’s MPC is expected to leave rates unchanged after it meets on 21-22 September.
  • Rwanda: Real GDP growth plunged to -12.4% y/y in Q2 from 3.6% in Q1, mainly explained by the effects of the coronavirus pandemic. The contraction in activity was evident throughout all economic sectors but with variation in extent. Accounting for 28% of GDP, agricultural output fell 2.0% y/y, services (45%) declined 16% while industrial production contracted 19%.
  • South Africa: After cutting rates by a cummulative 300bp so far this year, the SARB MPC left its policy rate unchanged at 3.50%. The Bank lowered its GDP growth forecast for 2020 to -8.2% y/y (from -7.3%), considering a weaker-than-expected Q2 and stronger expansion over the rest of the year. Though accentuating that economic output will take some time to return to pre-pandemic levels, the SARB indicated that the growth could rise to 3.9% next year (revised from 3.7%). There were small tweaks on the Bank’s projected inflation trajectory, but it continues to expect inflation to average below the mid-point of the 3-6% target through the medium term. Risks to both the inflation and growth outlooks were assessed to be balanced.



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