IN BRIEF

• GHANA
  Fixed Income: The appetite for Ghanaian T-bills strengthened remarkably in January 2025, evoking sentiments of the early-year favourable demand conditions observed in 2024. However, this raises perception of strategic asset allocations with stronger demand for the 364-day tenor. We think this reflects renewed post-election confidence in the debt management outlook and strategic asset allocation to lock-in yields at 30.0% as investors become constructive on Ghana’s macroeconomic outlook. Ultimately, the Treasury accepted GHS 30.5bn, exceeding the target by GHS 8.6bn (+39.2%) and building a sufficient cash buffer ahead of the February 2025 coupon payment on the DDEP bonds. Based on the demand condition observed in January 2025, we are cautiously optimistic of sufficient demand at this month’s auctions with a downside risk for yields.
  
  Currency:
• The Ghanaian Cedi commenced the new year on the back foot as corporate demand steadily returns with the need to replenish depleted inventories from the just-ended festivities. Demand was mainly from the manufacturing and energy sectors. The Bank of Ghana unexpectedly returned to the market with 7-day FX Forward sales at a cumulative size of USD 449.0mn in the final 2-weeks to cap the depreciation pressure. Nevertheless, the Cedi lost 4.2% against the USD in January 2025. Our near-term outlook on the GHS is cautious, reflecting the rising seasonal demand amidst sporadic FX sales by the BOG.
  
  
• KENYA
  Fixed Income: Investor demand for Kenyan Treasury bills softened for the second straight month in January 2025, contributing to a sharp slowdown in the pace of yield decline across the T-bill curve. We think the Treasury’s plan to stop the issuance of 364-day tenors seeks to reduce the share of short-term debt in the total debt portfolio. However, we believe a corresponding reduction in the weekly targets from the current KES 24.0bn will be required to achieve reduction in rollover risk. The authorities also plan to initiate local private placements for government securities, targeting specific segments of the market. We think excessive use of private placements could undermine investor confidence in the true state of the public debt and distort price discovery in the trading of KENGBs.
  
  Currency:
  The Kenyan shilling was impressively stable in January 2025, sustaining its good run from last year with the high domestic yields anchoring offshore appetite. Although a decline in trade volume in the first 3-weeks, ostensibly due to tighter FX supply, softened the KES by 0.2% against the USD, we observed a spike in FX trade in the subsequent days, erasing the mild losses by end January 2025. In the month ahead, we expect the USDKES pair to remain rangebound with the 1-month forward rate quote at 129.6/USD.

 

 

• NIGERIA
  Fixed Income: The Treasury was less active in the T-bill primary market in January 2025, executing only two auctions across the 91-day to 364-day tenors. Investor appetite weakened significantly for the 91-day and 182-day maturities, albeit remaining strong for the 364-day instrument, driving overall demand beyond the Treasury’s target. We believe investors are seeking to lock-in relatively high rates for the long-dated instrument amid a peak in yields and expectations of easing inflation in the months ahead.
  
  Currency:

  The Nigerian Naira began 2025 on a strong footing, extending the gains posted in December 2024 with a 2.9% gain against the US dollar in January 2025. The sustained Naira resilience reflects improved FX liquidity, supported by increased inflows from offshore investors and the CBN’s FX market reforms, which has enhanced transparency and efficiency in the FX market. We expect the Naira’s stability to persist in the short-term, driven by increased oil production, expected to bolster FX reserves and enhance FX liquidity. However, Nigeria’s external debt servicing obligations and potential volatility in global oil prices pose downside risk to the outlook.