market commentary
Oil prices declined on Monday as investors awaited the outcome of a U.S. Federal Reserve meeting to assess the likelihood of further interest rate hikes. The market was also influenced by concerns over China’s fuel demand growth and increased crude supply from Russia. Brent crude futures dropped by 0.94% to $74.09 a barrel, while U.S. West Texas Intermediate (WTI) crude fell to $69.53, a decrease of 0.91%.
KENYA: FOREST BUFFER RISES ABOVE 4 MONTHS COVER ON WORLD BANK LOAN
Kenya’s foreign exchange reserves have surpassed the required level of four months of import cover for the first time in nearly six months. This was made possible by the receipt of a $1 billion World Bank loan amounting to Sh139.3 billion. The country’s forex reserves now stand at Sh1.049 trillion, equivalent to 4.15 months of import cover. The previous week’s data showed reserves at Sh857 billion, or 3.62 months of import cover. The forex buffer had fallen below the four-month threshold in late November 2022 due to mounting pressure from external debt service and limited access to external financing. Forex reserves are crucial for repaying external loans and importing essential goods such as drugs and fuel.
NIGERIA: NIGERIA BONDS SURGE AFTER CENTRAL BANK CHIEF’S WEEKEND OUTSTER
Nigeria’s international bonds experienced a significant surge following the removal of the central bank governor, Godwin Emefiele, resulting in the nation’s longest-dated dollar bonds reaching their highest level since January. The 2051 bonds rose nearly 3 cents on the dollar to 73.42, marking the biggest gain since April. Emefiele’s suspension by President Bola Tinubu and subsequent detention by Nigeria’s state security service were attributed to “investigative reasons.” Emefiele’s monetary policies, including propping up the naira, restricting foreign exchange for numerous imports, and focusing on development finance, had drawn criticism from investors, economists, and institutions such as the World Bank. The central bank also lent the government 22.7 trillion naira ($49 billion), contributing to the country’s record public debt of 77 trillion.
GHANA: GHANA RETURNS TO GOLD TOP SPOT AS OUTPUT JUMPS 32%
In Ghana, gold production surged by 32% last year, allowing the country to reclaim its position as the largest gold producer in Africa from South Africa. Ghana had lost the top spot in 2021 due to a significant decline in output. The increase in gold production to 3.7 million ounces in 2022, compared to 2.8 million ounces the previous year, was driven by growth in both the large-scale and small-scale sectors. The large-scale gold sub-sector achieved its highest output in the country’s history, contributing 3.1 million ounces to the national gold output, a 13% increase from 2021’s 2.7 million ounces.
EGYPT: INFLATION ACCELERATES ABOVE 30%
In Egypt, inflation accelerated to over 30% after a brief respite, driven by a series of price increases implemented by authorities following multiple currency devaluations. In May, consumer prices in urban areas rose by 32.7% compared to the previous month’s 30.6%, with food and beverage costs, the largest component of the inflation basket, increasing by 60%. Over the past year, Egypt’s inflation rate has tripled due to the devaluation of the pound and the receipt of $3 billion from the International Monetary Fund. Despite a global decline in food prices after the Russia-Ukraine conflict, Egypt recently raised the prices of subsidized commodities such as rice and sugar, and significantly increased domestic diesel prices for only the second time since mid-2019