14 December 2023

Market Commentary

Asian markets saw oil prices increase on Thursday, building on previous gains, as U.S. crude inventories reported a larger-than-expected weekly drop and the U.S. Federal Reserve signaled lower borrowing costs in 2024, boosting demand prospects. Brent futures settled at $74.49 a barrel by 0345 GMT, up 23 cents, or 0.31%. U.S. West Texas Intermediate (WTI) crude settled at $69.58 a barrel, up 11 cents, or 0.16%.

KENYA: Kenya Announces Bold Policies to Curb Capital Flight, Forex Issues, and Debt Problems
Kenya’s National Treasury Principal Secretary, Dr. Chris Kiptoo, unveiled plans for strong policies in the next year to tackle capital flight and deal with foreign exchange and debt issues. To mitigate the effect of high interest rates worldwide, especially in the US and Europe, Kenya aims to keep competitive rates, deterring capital flight and strengthening the Kenyan Shilling. Dr. Kiptoo justified the need to match global interest rates, stressing the need to move from debt dependence to domestic revenue mobilization, targeting 16% of GDP in 2024/25 through the Finance Act 2023 and Medium-Term Revenue Strategy. Measures include cutting non-essential spending, using public-private partnerships, and promoting revenue generation by government entities.

NIGERIA: World Bank Questions Nigeria’s Transparency on Fuel Subsidy Removal Benefits
The World Bank, in its December 2023 Nigeria Development Update, condemns the Nigeria National Petroleum Corporation Limited (NNPCL) for its lack of transparency on financial benefits from fuel subsidy removal. Despite noticeable revenue benefits from exchange rate reforms, the Bank demands clarity on oil revenues, especially the fiscal impact of subsidy removal, arrears deduction, and the NNPC’s benefits. The report observes that net oil revenue benefits are lower than expected after the removal of the fuel subsidy, raising concerns about possible reappearance of implicit subsidies affecting overall fiscal results.

GHANA: Minority Accuses Govt of GHC7 Billion Crony Tax Waivers Under 1D1F Policy Pretext
The Minority in Parliament alleges the government intends to grant a huge 7 billion Ghana Cedis in tax waivers to trade industry cronies. This disclosure follows a disguised 5 billion Cedis tax waiver request for the One District One Factory (1D1F) policy. Yussif Sulemana, Ranking Member on the Trade and Industry Committee, cautions of strong resistance if the government continues to impose regressive taxes, underlining the contradiction of taxing citizens while granting sizable exemptions to cronies, totaling 12.5 billion Cedis.

EGYPT: BMI Research Forecasts Egypt’s Inflation to Fall to 27.4% in 2024
According to a BMI Research report, Egypt’s average inflation is projected to fall from 34.1% in 2023 to 27.4% in 2024, driven by expected measures by the Central Bank of Egypt (CBE) to stabilize the exchange rate. Despite a November drop in annual headline inflation to 36.4%, the report lowers the growth forecast for FY2023/2024 to 4.2%, citing potential economic impacts from the Gaza war, including a drop in gas imports from Israel affecting liquefied natural gas exports and adding to export challenges. The war adds uncertainty, prompting investors to adopt a cautious stance.

ANGOLA: Angola Receives $105.19 Million Loan from AfDB to Reform Agriculture Sector
The Agriculture Sector Reform Programme, a $105.19 million loan from the African Development Bank Group, will help Angola improve its agriculture policy and business environment, promoting economic diversification and better food production. The program will aim to increase the productivity of small farms, link them to the economy, and improve governance while attracting private sector involvement. Key components include national policies on agricultural mechanization and irrigation, rural market development, and digital platforms for farmers. The long-term impact includes improved access to modern inputs, higher cereal productivity, and overall agricultural growth

by fixed income research team