market commentary
Oil rebounded on Thursday after the previous day’s plunge, as data showed a jump in refinery runs at the world’s top crude importer China, though a weak economic backdrop capped gains. Brent crude futures rose 39 cents, or 0.6%, to $73.59 a barrel by 0630 GMT. U.S. West Texas Intermediate (WTI) crude climbed 39 cents, or 0.6%, at $68.66 a barrel.
KENYA: Kenya To Unveil Annual Budget to Boost Economy
Kenya’s Cabinet Secretary for National Treasury & Economic Planning will unveil the key points of the country’s annual budget today, outlining spending priorities and funding strategies. In response to Russia’s invasion of Ukraine and the ongoing impact of the pandemic, the Kenyan government plans to bolster their economies through increased expenditure. This budget marks President William Ruto’s first since assuming office in September. With lawmakers’ approval, the fiscal framework sets a target of 3.68 trillion shillings ($26.3 billion), a 9% increase in spending for the upcoming fiscal year starting July 1. To manage the budget deficit, the government aims for a 17% rise in tax collections, though the budget office has expressed concerns over its achievability, given the correlation between revenue and economic growth. The International Monetary Fund predicts a 5.3% expansion in Kenya’s gross domestic product this year
GHANA: Ghana’s Inflation Rises on Soaring Food Prices
Ghana’s inflation rate unexpectedly increased in May after five months of decline, driven by surging food prices, putting pressure on the Central Bank to resume raising interest rates. Annual inflation rose to 42.2% from 41.2% in April, with food prices soaring to 51.8% from 48.7%. Non-food price growth slowed to 34.6% from 35.4%. Overall, prices rose by 4.8% during the month. The rise in prices was influenced by new taxes, seasonal factors affecting food prices, and a slight increase in fuel prices despite the stable value of the cedi against the dollar. The central bank’s monetary policy committee, which had been aggressively tightening policy to curb inflation and stabilize the currency, decided to hold its key rate steady at 29.5% on May 22, anticipating a continued slowdown in inflation.
ZAMBIA: Zambia Cancels Over-Priced Power Plant Contract on Zambezi River
Zambia has announced its withdrawal from a construction contract awarded to General Electric Co. and Power Construction Corp. of China in 2019 for the over-priced development of a 2,400-megawatt power plant on the Zambezi River. Zambia’s energy minister, Peter Kapala, stated that proper procurement methods were not followed during the deal’s negotiation. The estimated cost of the project, according to the Zambezi River Authority, was $5 billion. The contract will be terminated, and Zambia intends to re-advertise it, taking into account the excessive cost. Delays in the project’s commencement occurred due to the COVID-19 pandemic and funding challenges.
NIGERIA: Nigeria’s Central Bank Allows Naira to Slump, Signals Currency Control Phase-Out
Nigeria’s central bank permitted the naira to hit an all-time low, signaling the potential end of long-standing currency controls that have distorted Africa’s largest economy. The naira plunged by 29% to 664 per dollar at Lagos’ closing, while the central bank devalued the rate for selling dollars to exporters and investors by 22%. President Bola Tinubu’s proposed reforms were met with enthusiasm by investors, leading to a surge in the stock market and government bonds. The central bank informed local banks that the naira’s exchange rate would be determined by supply and demand, replacing the previous fixed rate system