IN BRIEF

• GHANA
  Fixed Income: Demand for Ghanaian T-bills strengthened for the third consecutive month in December 2024 with investor appetite strengthening for the 91-day and the 182-day tenors amidst the yield upturn. However, the prevailing narrative of high auction targets persisted, with resultant uncovered auctions in the just-ended month.  Yields went up across the T-bill curve for the fourth consecutive month, albeit at a slower pace with indications of approaching peak levels. In 1Q2025, we estimate upcoming T-bill maturities at GHS 76.8bn, requiring an average weekly bid of over GHS 5.9bn to match, potentially sustaining elevated yields in early 2025. We peg the January 2025 T-bill maturities at GHS 20.0bn with the 91-day bill accounting for two-thirds of the estimated maturities, underscoring the Treasury’s funding pressure in early 2025.
  
  Currency:
• The Ghanaian Cedi extended its recent appreciation into the second straight month, appreciating by 4.0% m/m (FY2024: -18.6%) against the US Dollar in December 2024 as the Bank of Ghana sold USD 659.4mn at its daily FX FWDs during the first 3-weeks. However, the appreciation trend peaked in mid-December as the interbank USDGHS bottomed-out at 14.7/USD while the BOG stopped its daily FX sales on 20th December 2024. As we commence 1Q2025, we foresee a steady return of FX demand in line with seasonal trend while the authorities settle first coupon due on the restructured Eurobonds in Jan-2025 financed with IMF inflow in Dec-2024.
  
  
• KENYA
  Fixed Income: Demand conditions weakened in December 2024, ostensibly reverting to trend, after the prior month’s surge amidst the ongoing downturn in Treasury yields. We think investors are increasingly rebalancing their fixed income portfolios in favour of Treasury bonds to mitigate the re-investment risk emanating from the declining yields on T-bills. Yields fell sharply, averaging -207bps across the T-bill curve, with the 75bps cut in the policy rate to 11.25% adding additional drag amidst the low inflation expectation and favourable FX conditions.
  
  Currency:
  The Kenya Shilling enjoyed a slight appreciation of 0.3% m/m against the US Dollar in December 2024 despite the FED’s less dovish signal for 2025, which supported the US Dollar against global currencies. The KES is firmly anchored on strong FX reserves at USD 9.2bn (4.7 months cover) and attractive real yields at an average of 7.4%, which continues to support market confidence and investor appetite for KES-denominated assets. We maintain our optimistic near-term view on the USDKES pair on account of the strong fundamentals – low CPI inflation, attractive real yields, and robust forex reserve cover. However, a stronger-than-expected USD remains a key risk.
• NIGERIA
  Fixed Income: Primary market activity improved in the Nigerian Treasury bills’ space as the Treasury executed two separate auctions in the first two weeks of the month to avoid the holiday-induced lull during the second half of the month. Yields were mostly stable with a downside bias at the back-end of the T-bill curve despite sustained rise in annual CPI inflation. Despite the negative real interest rates for resident investors, we view the 41.0% devaluation of the USDNGN FX rate in 2024 as adequate compensation for non-resident entry in view of the 1-year forward rate which suggests a likelihood of 16.1% depreciation.

  
  Currency:

  The Naira appreciated strongly in December 2024, aided by the ongoing FX market reforms which went a notch higher with the full rollout of an Electronic Foreign Exchange Matching System – Bloomberg BMATCH. Expectedly, the CBN also resumed weekly FX sale to Bureau De Change (BDC) operators, allowing a cap of USD 25,000 per BDC from 19th Dec-2024 to 30th Jan-2025. This supported the Naira to a 9.0% m/m gain vs the US Dollar in December 2024. While we view the latest improvement in Nigeria’s FX market structure as positive for medium term NGN stability, the sustained uptrend in inflation remains a near-term risk. We thus expect the CBN to sustain its hawkish posture.