Forex

Rand Jumps 1.6% as ANC Faces Historic Coalition Negotiations

Published

4 months ago

June 4, 2024

The South African rand surged by 1.6% on Monday, its most significant one-day gain since December 14.

This rebound is fueled by investor optimism that the country’s coalition talks will culminate in a market-friendly government.

The rise in the rand, coupled with strong performances in South African stocks and bonds, signals a wave of confidence sweeping through financial markets.

For the first time in three decades, the ruling African National Congress (ANC) failed to secure a majority, obtaining only 40.2% of the vote.

This unprecedented outcome has opened the door to various coalition possibilities, some of which were previously deemed unlikely.

Alliances with the left-leaning Economic Freedom Fighters (EFF) or the newly formed uMkhonto weSizwe Party (MKP) are now on the table.

However, investors are particularly hopeful for a coalition with the largest opposition party, the Democratic Alliance (DA), which is seen as more conducive to economic stability and reform.

“Our perception is that the market views a potential coalition with the DA as overall benign albeit fragile,” commented Yvette Babb, a portfolio manager at William Blair Investment Management. “A formal alliance with the DA would be most supportive and perhaps give rise to a rally in asset prices. However, we believe there may be an enduring rise in the South African risk premium given the increase in implementation risks.”

South African assets experienced significant volatility during the initial hours of trading on Monday but ended the day on a more stable footing.

The FTSE/JSE All Share Index concluded the day as the second-best performing equity gauge in dollar terms among the 92 indexes monitored by Bloomberg.

Moreover, South Africa’s dollar bonds were among the top performers in Bloomberg’s index of emerging and frontier sovereign Eurobonds.

Finance Minister Enoch Godongwana assured that the ANC would not make reckless decisions in selecting a coalition partner, emphasizing the importance of maintaining investor confidence and economic policy continuity.

Current coalition discussions involve potential alliances with the EFF, the MKP, and the DA.

The ANC has ruled out a demand by the MKP that President Cyril Ramaphosa step down, considering instead a minority government or a “confidence and supply” agreement to ensure stability.

Citigroup’s economist Gina Schoeman noted that a minority government led by the ANC would create “parliamentary uncertainty and instability.”

A pact with the DA, on the other hand, would be welcomed by financial markets, potentially accelerating economic reforms and privatization initiatives. Many analysts consider this scenario to be more likely.

Despite the setback at the polls, the ANC remains South Africa’s largest party. Investors are cautiously optimistic that a coalition with the DA will emerge, fostering a conducive environment for economic growth.

Sebastien Barbe, head of emerging market research at Credit Agricole, pointed out that while the rand’s current levels are not particularly stretched, the political uncertainty adds to downside risks.

“The higher risk premium that would arise as a result of a coalition between the ANC, EFF, or the MKP is reason alone to not enter such a coalition,” Schoeman said, attributing only a 15% probability to this outcome. Barbe added, “The rand at current levels is not particularly stretched, and the carry is decent, so this may limit some possible depreciation pressure that would come from political uncertainty.”

As the deadline of June 17 for swearing in a new government approaches, investors and analysts alike will be closely monitoring the coalition talks.

The outcome of these negotiations will undoubtedly have far-reaching implications for South Africa’s economic trajectory and investor sentiment in the coming months.

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Samed Olukoya

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Naira

Dollar to Naira Black Market Exchange Rate Today 24th, September 2024

Published

3 days ago

September 24, 2024

Samed Olukoya

The Nigerian Naira exchange rate to the United States Dollar remained at a record low ahead of the Central Bank of Nigeria (CBN) monetary policy decision scheduled for today and tomorrow.

Forex traders bought the Dollar at N1,665 at the parallel market, popularly known, as the black market and sold at N1,675. The British Pound Sterling (GBP) was acquired at N2,220 and sold at N2,240 as shown in the table below.

Naira (NGN) to Dollar (USD) Black Market Exchange Rate Today

Foreign Currency	Buying rate	Selling rate
DOLLAR ($USD)	N1,665	N1,675
POUNDS STERLING (GBP)	N2,220	N2,240
EURO (EUR)	N1,825	1,845
YUAN (CNY)	N222.28	N222.42

At the official forex segment, the local currency was stronger as it was exchanged at N1,587.34 to a United States Dollar while the GBP was traded at N2,066.56 and N2,067.86, respectively.

CBN Exchange Rate Today

Foreign Currency	Buying rate	Selling rate
DOLLAR ($USD)	N1,587.34	N1,588.34
POUNDS STERLING (GBP)	N2,066.56	N2,067.86
EURO (EUR)	N1,761.32	N1,762.42
YUAN (CNY)	N225.35	N225.49
SAUDI RIYAL (SAR)	N423	N423.29

Forex

Nigeria’s Foreign Reserves Gains, Hit $2.35 Billion In Seven Months – Minister Edun

Published

6 days ago

September 22, 2024

Bassey Marshall

The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, has revealed that the country’s foreign reserves have seen a net inflow of approximately $2.35 billion in the first seven months of 2024.

The minister made this known in Lagos State during the Corporate Customers Forum on Thursday.

Edun attributed the gain in reserves and currency stability to the government’s proactive economic policies.

Furthermore, the minister highlighted some areas that require attention, including Nigeria’s tax-to-GDP ratio, which remains low at around 10%, and the revenue-to-GDP ratio, which stands at 15%.

Edun called for increased spending on infrastructure and social safety nets to address these figures.

His words: “We have relative currency stability. And, of course, the all-important margin of the rates. We’ve seen a gradual elimination of multiple exchange rates.

“We also have foreign exchange liquidity. The gross reserves are up. There has been a net inflow in the first seven months of this year of about $2.35 billion every month.

Minister Edun continued: “On the fiscal side as well, government revenues are growing, and the key to government revenue is not so much that government has revenue to compete with the private sector.

“It’s the fundamentals, the social spending, and the key infrastructure spending. The social safety net spending. Historically, our figures are low. Our tax-to-GDP ratio is as low as 10%. Our revenue-to-GDP ratio is also around 15%.”

Forex

Nigeria’s External Reserves Surge by $490 Million After $500 Million Domestic Dollar Bond Issuance

Published

2 weeks ago

September 13, 2024

Investors King

Nigeria’s external reserves, also known as foreign currency reserves, jumped by $490 million in one week following the successful issuance of domestic dollar bonds by the Debt Management Office (DMO).

Data from the Central Bank of Nigeria (CBN) showed that the external reserves grew to $36.73 billion as of September 10, 2024, from $36.24 billion recorded on September 2, 2024.

On August 19, 2024 the Nigerian Government issued $500 million, the first series of the $2 billion domestic US dollar bond to investors, to stabilise the economy.

During the hybrid roadshow of the domestic US dollar bond in Lagos on August 15, 2024, Wale Edun, the Minister of Finance and Coordinating Minister of the Economy, said the move would enhance foreign currency reserves.

The naira on Wednesday recorded 5.06 percent gain on the official foreign exchange (FX) market following an increase in dollar supply to $221.24 million in one trading day.

After trading on Wednesday, the naira appreciated by 5.06 percent as the dollar was quoted at N1,558.75 compared to N1,637.59 quoted on Tuesday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), according to data from the FMDQ Securities Exchange Limited.

In what is considered a landmark transaction, the Federal Government raised over $900 million from investors.

The bond, which was over 180 percent subscribed, marks a crucial step in broadening Nigeria’s funding avenues amid global economic headwinds. It reflects growing investor confidence in the nation’s economic outlook.

According to him, the move aims to stabilise the exchange rate, manage inflation, and ultimately reduce interest rates.

We are very pleased to announce the successful launch of this crucial domestic issuance of Federal Government U.S. dollar bonds to the investing public and other stakeholders. Under President Bola Ahmed Tinubu, the macroeconomic reforms have made bold and courageous strides to stabilize the economy while fostering innovation, creativity, and imagination among all economic actors, including those in the financial markets,” Edun stated.

He added, “This historic issuance will provide essential foreign exchange liquidity and boost reserves, which will help stabilise the exchange rate, manage inflation, and eventually lower interest rates. It will also lay the foundation for increased investment by both domestic and foreign direct investors.”