EXPERT PEGS NIGERIA’S FOREIGN EXCHANGE RATE AT N395/$1 IN 2019

weaker than we expected, and the Monetary Policy Committee (MPC) chatter has swung from rate cuts to hikes.

“Added to that the naira is no longer cheap, of the smaller economies, Rwanda’s growth recovery has been sharper than we expected, while Zambia disappointed with sluggish growth and fiscal slippages. We are now more constructive on Kenya, we like Rwanda, are neutral on Ghana and Tanzania, and cautious on Nigeria and Zambia.” As for Kenya Mhango said the recovery from 2017’s headwinds was stronger than they expected.

“Growth rates above five per cent returned more swiftly than we predicted. YoY growth accelerated to 5.3 per cent in 4Q17 and 5.7 per cent in 1Q18. We were most surprised by the non-oil economy’s strong performance despite low, single-digit credit growth. This suggests the National Assembly’s vote, in August, not to repeal the rate cap bill may not be as negative for growth as we had feared. (President Uhuru Kenyatta has yet to sign the draft legislation that retains the rate cap.) We are now forecasting growth of 5.4 per cent for 2018 (vs 4.6 per cent in early 2018). The Kenyan shilling (KES) – which is overvalued, by our estimates – has strengthened vs the dollar YtD, on the back of inflows of euro bond proceeds, strong remittances and locals capitalising on a tax amnesty on foreign-held assets. While we foresee a KES depreciation, we expect it to be well managed.