Economic and finance streaming around Africa African countries with controlled foreign exchange rates


By Momodou Camara

Several African countries have come under scrutiny over their foreign exchange regimes, that are often strictly managed by states in the face of thin reserves and dollar shortages. While some like Egypt and Angola have recently loosened the grip on their currencies, allowing for economic adjustments through their exchange rates, there are still quite a number who still control their foreign exchange rates.

Africa’s biggest oil exporter operates a multiple exchange rate regime, which it has used to manage pressure on the currency. The official rate NGN= of 306.90 is supported by the central bank but the NAFEX rate (Nigerian Autonomous Foreign Exchange Rate Fixing) of 362 is widely quoted by foreign investors and exporters.


Central and West Africa (CFA Franc)
Countries in the eight-nation West African CFA franc zone (Benin, Burkina Faso, Guinea-Bissau, Ivory Coast, Mali, Niger, Senegal and Togo) and the six-nation Central African CFA franc zone (Cameroon, Central African Republic, Chad, Republic of the Congo, Equatorial Guinea and Gabon) have their respective currencies pegged to the euro XOF=. Both are guaranteed by the French treasury and were pegged to the French franc before the euro. Although the two currencies are in theory separate legal tenders, they have been effectively interchangeable. The CFA franc is pegged at 655.957 to the euro.

Africa’s biggest coffee exporter has operated a carefully managed floating exchange rate regime since 1992 for its birr currency ETB=. In September, the country’s central bank governor said Ethiopia should slowly liberalise its exchange rate regime but was unlikely to move to a fully floating rate within the next three years.

The dirham MAD= is pegged against a euro-U.S. dollar basket, with the latter having a weighting of 40%. In January 2018, Morocco widened the band in which the dirham trades against hard currencies to 2.5 percent either side of a reference price from the previous 0.3 percent.

The country’s dinar DZD= is managed against an undisclosed basket of major currencies.

Africa: foreign currencies in short supply
Today we reflect on the problem of the currency crisis in several African countries…
From Nigeria to Zimbabwe to the Central African states, the problem is real. The Dollar, the Euro and the Pound Sterling, which are widely used in international trading, are in short supply. Much has been said about the origin of this situation. Beyond the fact that economies are essentially extroverted; oriented towards satisfying external needs, beyond the structure of African economies refractory to the transformation of their own raw materials to specialize in exports of raw materials. This situation should challenges our states as a priority. How do we get out of this? Many, like the analyst Idriss Linge, believe that it is imperious to transform the structure of African economies from top to bottom, so that they cease to be mere powder suppliers of raw materials to the rest of the world… Certainly we can question the role of certain companies and multinationals that export the essential, if not all their benefits… Some companies, businessmen and even individuals can be blamed for their currencies in foreign bank accounts. Accentuating the currency crisis… Economic intelligence specialists we consulted during the preparation of this segment implore with all their hearts the advent of strategic states in Africa… They underline a kind of physical inactivity, lack of audacity, lack of revolt of our states… In Africa it is still normal to import most of what we eat while arable land in abundance suffers from fallow. In Africa, it is normal to import biscuits, eggs, mineral water, needles, etc… In short, to squander the rare currencies laboriously acquired to obtain products that are within our reach… President Buhari, whose country spent $503 million on food in 2018, has been hostile to spending precious Dollars now to buy food that can be produced… And $503 million, I would point out that this is the profit made in China in 2015 by the American car manufacturer General Motor… This is the amount that the continent’s largest economy spent in 2018 to import rice only. It is thinking time for Africa.

Sudan, international lenders agree on reforms
Sudan has agreed on a roadmap to “rehabilitate” the country with the World Bank, International Monetary Fund and African Development Bank, its finance minister said. Finance Minister Ibrahim Elbadawi said the plan involved structural reforms but did not go into further details. He said as part of the deal Sudan would not have to pay its lenders debt arrears. There could also be non-financial support. Sudan’s inclusion on a list of countries deemed sponsors of terrorism by the United States makes it ineligible for debt relief and financing from lenders like the International Monetary Fund and World Bank, cutting off a crucial source of finance. Elbadawi was speaking to reporters at Khartoum airport after he flew back from Washington, D.C., where he was attending the annual World Bank and IMF meetings. He said negotiations with other creditors would begin in March. “Based on that, Sudan’s debt relief programme will start by the end of 2020,” he said, without giving further details. Elbadawi said that “friends of Sudan” will fund its 2020 budget, and said the ministry has submitted financing requests for 20 projects to donors, without identifying who those donors were. A “friends of Sudan” meeting will be held in Khartoum in early December, he said. Another meeting for donors will be held in April. Saudi Arabia and the United Arab Emirates have given Sudan $3 billion in aid, agreed on after former president Omar al-Bashir was ousted in April, throwing a lifeline to Sudan’s new military leaders at the time. Sudan’s new transitional government, formed as part of a three-year deal agreed by military and civilian leaders in August, has been working to remove Sudan from the U.S. sponsors of terrorism list, to potentially open the door for foreign investment. Prime Minister Abdalla Hamdok is expected to visit the United States soon, Elbadawi said, without saying when.


*** These are indicative figures as per the 6th. October, 2019.
*** Market prices are as at 05th. November, 2019
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