Its not easy being a Central Banker in Africa

Its not easy being a central bank governor in Africa: the slowing Chinese economy and falling commodity prices are putting pressure on growth while a strong US dollar and expectations of US interest rate rises further complicate matters. In order to try and control inflation and help protect their currencies, policy makers in South Africa (Repo rate 6% +0.25%), Ghana (Key lending rate 22% +1.00%), Angola (Benchmark interest rate 10.25% +0.5%) and Uganda (Central bank rate 14.5% +1.5%) have all raised interest rates this year. South African Reserve Bank Governor, Lesetja Kganyago, even went to far as to say he was raising interest rates to stay one step ahead of the US Federal Reserve. Kenyan policy makers have raised interest rates by 3% over the passed two months to 11.5% but surprised markets on Wednesday by keeping rates constant.

Evidence of the effects of the more than 50% fall in the oil price are most acutely observed in Nigeria, where the naira has lost 19% of its value against the dollar over the past year. The official exchange rate is locked at 198, but last week the naira traded at 240 to the dollar on the black market. Nigerian policy makers have announced further restrictions on foreign exchange trading and have restricted imports of food, cement and other critical good in order to promote local production and bolster Nigeria’s dwindling foreign exchange reserves. So far, central bank governor, Godwin Emefiele, has resisted calls to further devalue the naira. The IMF predicts that economic growth will fall to 4.8% this year from 6.3% last year.

Botswana however, which is the world’s largest diamond producer, is bucking the tightening trend. This week the central bank lowered its main lending rate by 0.5% points to 6% following a 1% point reduction in February. In March economic growth slowed to 4.6% compared with 7.9% in the previous year. However past fiscal surpluses, adequate foreign exchange reserves and low inflation (3.1% in June) give Botswana flexibility to boost growth and the ability to defend the pula peg.

(Sources: Bloomberg, FT)

We’ve summarised some key data for sub-Saharan Africa’s 20 largest economies below:

(Sources: World Bank,, 

(Sources: World Bank,, 


NewsAndrew LouwComment