Currency depreciation, inflation and debt drive ZSE, NGX

The Zimbabwe Stock Exchange (ZSE) has been ranked among the three of the fourteen Sub-Saharan Africa’s (excluding South Africa’s) stock markets that have had positive US dollar returns year to date.

According to the latest African Financials Research report, SSA (excluding South Africa) markets US dollar returns were up 11,9 percent in January 2024.

Zimbabwe topped the top three lists with a gain of 50,2 percent, followed by Nigeria at 27,7 percent and the Seychelles completed the list with a marginal gain of 2,4 percent.

“SSA ex SA’s stock markets go crazy in Nigeria and Zimbabwe reacting to currency depreciation, inflation and debt. Small free floats magnify movements,” reads the report.

Kenya recorded a 20 year low in US$ terms, according to the report.

Zimbabwe’s currency fell 42 percent in January.

“February 2024 has seen the Nigerian Naira weaken a further 60 percent and the Zimbabwe dollar 38 percent.”

This comes after analysts and researchers say pressure on the local currency will continue in 2024 as government and the Reserve Bank of Zimbabwe need to increase the currency in circulation to cover export liquidations.

The RBZ in October 2023, adjusted its retention policy to a flat fee of 75 percent from different ratios ranging from 70 percent to 85 percent, prompting research firms to say this means increased local currency in circulation.

In their 2024 economic outlook, Morgan and Co, said the local currency will continue to face pressure from foreign currency retention resulting in increased currency depreciation.

“We opine that the expected rise in the trade deficit in 2024 prompted the central bank to lower foreign currency retention back to 75 percent with the balance being settled in Zimdollar at the prevailing official rate. The move holds several implications, chief of them being a further depreciation of the Zimdollar and Zimdollar inflationary pressures,” Morgan and Co said in their 2024 economic outlook.-ebusinesweekly