Ghana cuts interest rates; Nigeria, S.Africa, Kenya expected to keep rates on hold

The Bank of Ghana will extend its interest rate-easing cycle on Monday to give its economy a boost but other major African central banks will keep rates stable after a commodity price slump, a Reuters poll found.

Ghana’s central bank cut its high prime rate by 200 basis points to 23.5 percent in March and is expected to chop another 100 basis points on Monday, according to the median forecasts of analysts polled this week.

The poll also suggested Ghana will have cut its benchmark rate to 20 percent by the end of this year and to 17 percent by end-2018.

Cobus de Hart at NKC African Economics said that even though Ghana is in an easing cycle, it was worth noting interest rates remain very high compared to some other more developed African countries.

Rates in Ghana are also starkly higher than those in the world’s biggest economy, where the United States Federal Reserve is expected to make another 25 basis point hike in the second quarter and a follow-up increase in the third, taking the fed funds rate to a range of 1.25 to 1.50 percent.

“Although Ghana is not out of the woods just yet, the country has made some progress with rectifying macroeconomic imbalances,” added De Hart.

Still, the International Monetary Fund has suggested to Ghana’s government it request an extension to a three-year $918 million aid programme due to end in April 2018.

NIGERIA, KENYA, SOUTH AFRICA TO HOLD

Major African peers – including Nigeria, currently battling a dollar shortage, and South Africa, with its credit rating recently downgraded to “junk status” – will hold rates next week.

Kenya – facing elections in August – is expected to hold rates stable at its May 29 meeting.

Gaimin Nonyane, head of economic research at Ecobank, said Nigeria would hold its monetary policy rate (MPR) at 14 percent on May 23 to balance the effect of ongoing fragility of the country’s recovery and elevated inflation.

“Instead of using the MPR, the central bank appears to be focusing on the use of open market operations in providing a signal to the market. This is reducing naira liquidity and the risk of currency speculation,” she added.

Nigeria sold $100 million on Monday at a special wholesale spot and forwards auction in a bid to improve dollar liquidity in the market and narrow the spread between official and black market rates, local media reported.

Nigeria is expected to cut interest 200 basis points from rates next year, setting then at 12 percent by end-2018.

Analysts in previous polls have argued Nigeria needs to liberalise its naira but are sceptical authorities will fully relinquish control over the currency, and a gap between the official and black market could be a permanent feature.

Down in the south of the continent, dollar shortages are not a problem for South Africa’s heavily traded rand. However, the possibility of rate cuts is fizzling out as the currency is at risk of being downgraded in the medium term.

South Africa’s repo rate is expected to remain on hold at 7.0 percent on Thursday and remain at that level until at least 2020.

The poll suggested the Central Bank of Kenya will hold rates at 10 percent on May 29 and in the run-up to and months after elections due in August, despite rising inflation that appears to be supply-driven, Nonyane said.

However, it will kick off its rate-easing cycle with a 50 basis points cut in the first three months of next year, followed by same margin again in the third quarter.

(Editing by Mark Heinrich)

Related Content

South African economy to shrink 4.9% in 2020, SARB to cut rates in May – Poll

South Africa’s economy will contract sharply this year as activity is hit by the coronavirus outbreak, despite expectations the central bank will cut interest rates again in May, a Reuters poll found on Monday.

Kenyan tax evasion crackdown sees billions of shillings recovered

In 2016 the Kenyan Parliament capped interest rates at 4 percent above the Central Bank’s benchmark amid concern about high rates in an effort to help small traders affordably access capital. At the time the interest rate controls were considered to be among the most drastic ever imposed by a government, now the conversation is about potential plans to repeal. To discuss this and other business headlines coming out of the country, Journalist, Joseph Bonyo joins CNBC Africa for more.

Central banks need to take human rights more seriously, here’s why

Many central banks are rethinking their approach to the environmental and social impact of their operations. This is because their decisions can affect access to housing, healthcare, education, work, to adequate food and water and the security of their pensions.

Op-Ed: Nigeria’s MPC shifts gears to neutral

Nigeria's MPC expressed its concern about weak growth expectations and mounting uncertainty in global financial markets.

Subscribe to our newsletter

Sign up for free newsletters and get more CNBC AFRICA delivered to your inbox

More from CNBC Africa

How COVID-19 impacts the health & well-being of children

Research shows that children have a lower rate of contracting the Coronavirus and bringing infections to the household. This should provide comfort to South African parents that are in two minds about sending their kids back to school next week, when physical teaching is set to resume. Epidemiologist, Dr Boshoff Steenekamp joins CNBC Africa for more.

Rebosis rolls out COVID-19 testing stations outside malls

Property Group Rebosis, has partnered with government to roll out testing stations for Covid-19 outside its shopping malls in Pretoria – South Africa’s capital. However, foot traffic into these malls is expected to have dived due to the virus lock-downs prevented non-essential stores from trading. Rebosis is yet to release its interim results. Rebosis CEO Sisa Ngebulana joins CNBC Africa for more.

Distell CEO: What the sale of alcohol under level 3 means for the industry

South Africans can look forward to popping their favourite bottle of bubbly or sipping on a glass of pinotage to warm up from the cold winter. That’s as alcohol sales, that were banned for over two months under the Covid-19 lock-down, will be lifted. Distell CEO Richard Rushton joins CNBC Africa for more.

This Rwandan publisher is creating buzz with new book App

After realising the challenges that come with publishing fellow African writers, home-grown publishing house, Imagine We Rwanda launched their very own mobile app, dubbed, Imagine Books. Fast forward 2 weeks and hundreds of titles have been purchased worldwide and the numbers are only going up. CNBC Africa spoke to the founder, Dominique Alonga for more.

Partner Content

VIVO CEO is a dynamic leader for this innovative global brand

May 2020 -- Six months ago the vision for vivo in South Africa was just beginning to...

Building Africa’s Biggest Digital Classroom

An enduring lesson learnt throughout our 175-year existence is that, while things rapidly change around us, the things that truly matter don’t!...

Trending Now

What Happens To Frequent Flyer Miles If An Airline Goes Bankrupt?

With U.S. passenger traffic down by 90%, airlines are desperate to fill seats and are offering big incentives to keep their most reliable customers loyal. But what happens to frequent flyer miles when almost no one is flying and can an airline loyalt

How The Medical Device Supply Chain Failed During Covid-19

More than three months into the coronavirus pandemic, health-care workers on the front-lines of the battle against Covid-19 say they still face shortages of personal protective equipment. The personal protective shortage was one of the early flashpoi

Tsogo Sun Hotels FY profits plunge, COVID-19 lock-downs weigh

Hospitality Group Tsogo Sun Hotels reported a 31 per cent plunge in full year headline earnings per share, with Covid-19 resulting in demand from international tourist retracting in the fourth quarter, due to global lock-downs.

Nampak swings into H1 loss, suffers R3bn impairment

Nampak swung to a half year loss of R2.4 billion as revenue plunged and it impaired its Angola and Nigeria assets by R3 billion, which is four times its market value. The also warned that future profits were in South Africa were at risk from the ban on alcohol sales due to Covid-19 lock-downs. Nampak CEO, Erik Smuts joins CNBC Africa for more.
- Advertisement -