Inflation and Interest Rates in Africa: A Big Deal For Investors?

Must Read

List of First Bank of Nigeria Sort Codes in Nigeria

The sort code is a number that usually identifies both the bank and the branch where an account is held. The sort...

Burger King Announces Grand Entry In To Nigerian Market, Promises First Restaurant In August 2021

Allied Food and Confectionary Services Limited announced exciting plans to launch and grow the Burger King® brand in Nigeria,...

List of Access Bank Sort Codes & Branches (with addresses) in Nigeria

The sort code is a number which usually identifies both the bank and the branch where an account is...
- Advertisement -
Recently, several African economies released inflation figures for Jan-2020. The region’s largest economies, Nigeria and South Africa, recorded inflation rates of 12.1% y/y (22-months high) and 4.5% y/y (7-months high) respectively. This was due to a respective pressure in food and energy prices. Similarly, inflation rates in Rwanda (7.3%) and Mauritius (2.0%), grew compared to Dec-2019. However, Ghana (7.8%), Tunisia (5.9%) and Namibia (2.1%) recorded lower y/y rates.
As compensation to investors, nominal yields on fixed-income securities in African countries are expected to remain above inflation. Using the 10-year bond as a proxy for nominal yield, across the countries covered, Ghana, Tanzania, and Egypt offer the highest real return at 11.2%, 10.7%, and 8.8% respectively. However, Mauritius (2.2%) and Morocco (1.5%) offer the lowest cover for inflation. For the continent’s heavyweights, South Africa offers 4.5% real yield, while Nigeria’s real yield at -1.4% is very worrisome, implying a negative real return for investors.
Looking at the performance of these economies in attracting capital, the positive real yields in Ghana and Egypt, coupled with strengthening local currencies (7.0% and 2.3% YTD respectively), have buoyed foreign portfolio inflows. As a result, foreign reserves for these countries has been on the rise. However, the policy uncertainties in Nigeria seemed to be slowing the pace of foreign capital flows, amid sustained pressure on external foreign reserves.
UNITED CAPITAL RESEARCH
- Advertisement -
Inflation and Interest Rates in Africa: A Big Deal For Investors? - Brand SpurInflation and Interest Rates in Africa: A Big Deal For Investors? - Brand Spur
- Advertisement -

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Inflation and Interest Rates in Africa: A Big Deal For Investors? - Brand SpurInflation and Interest Rates in Africa: A Big Deal For Investors? - Brand Spur

Latest News

How The Trump Plaza, Atlantic City, Came to be Demolished

It is not so often nowadays that a building is simply demolished, particularly not one of this scale. We...
- Advertisement -
BrandsPur Weekly Cartoons
- Advertisement -Inflation and Interest Rates in Africa: A Big Deal For Investors? - Brand SpurInflation and Interest Rates in Africa: A Big Deal For Investors? - Brand Spur