African policy makers gear up for rates decision next week

African policymakers are facing a critical juncture as they gear up for rates decisions in the coming weeks in the wake of the US Federal Reserve's aggressive 75-basis points rate hike to combat soaring inflation. The impact of these decisions is expected to reverberate across the continent, with countries like Nigeria and Ghana expected to make key decisions regarding their monetary policies. Nnamdi Nwizu, a Co-Managing Partner at Comercio Partners, provided insight into the current economic landscape and the challenges ahead in an interview on CNBC Africa. The US Federal Reserve has been proactive in raising rates this year, with multiple rate hikes totaling 200 basis points. This is a significant shift from their previous projections, underscoring their commitment to controlling inflation and stabilizing the economy. Nwizu pointed out that the US Fed's actions signal a willingness to endure short-term pain to achieve long-term stability, with the possibility of further rate hikes on the horizon. As African economies prepare to make their own policy decisions, the focus is on striking a balance between inflation control and economic growth. Nigeria and Ghana are expected to follow suit with rate hikes to align with global trends and attract foreign investors. In Ghana, the specter of a sovereign debt default looms large, with discussions about debt restructuring underway. Nwizu highlighted the challenges facing Ghana in attracting investors and managing its debt levels. The country's debt service to revenue ratio is a cause for concern, and any default could have ripple effects on its bond market. The need for robust economic strategies is equally pressing in Nigeria, where domestic debt servicing is straining government finances. The declining oil revenue poses a significant challenge, requiring innovative solutions to boost revenue generation and reduce reliance on borrowing. The prospect of IMF intervention looms large if structural issues are not addressed promptly, a scenario that could further impact the economy. Nwizu emphasized the importance of implementing gradual reforms to mitigate economic shocks and ensure sustainable growth. The evolution of Nigeria's financial sector is also evident in the shift towards tech-driven banking services. Banks are diversifying their revenue streams by venturing into technology platforms and other financial services. The approval of payment performance licenses and changes in ownership structures reflect the changing landscape of financial services in the country. Nwizu noted the shift towards digital banking and tech platforms as a strategic move to enhance profitability and investor confidence. As African countries navigate the economic challenges ahead, policymakers and financial institutions will need to adapt swiftly to ensure stability and growth in the face of global uncertainties.