IN BRIEF

• GHANA
  Fixed Income: Investor demand for Ghanaian Treasury bills declined m/m in March 2024, albeit exceeding both the gross target (+26.8%) and T-bill maturities (+37.4%) for the month. In our view, the m/m decline in demand reflects the normalization of money market liquidity after the boost from coupon payments on the restructured bonds in February 2024. Yields fell by an average of 125bps in March 2024 (-340bps q/q) across the T-bill curve as the Treasury continued to trim nominal and ex-post real yields against lower inflation expectations. Following the latest adjustments to the Cash Reserve Ratio of banks, we forecast a potential liquidity squeeze of between GHS 11.2bn and GHS 22.4bn, which will weigh on investor demand in April 2024 and slow the pace of yield decline.

  Currency: The Ghanaian Cedi remained on the ropes in March 2024 as the excess Cedi supply in the money market continued to elevate corporate FX demand. The GHS lost 4.4% m/m (-9.6% YTD) against the USD in March 2024 and the upcoming dividend payments in 2Q2024 indicates further headwinds ahead. However, we expect the recent hike in CRR of banks to significantly reduce Cedi liquidity and curb the FX demand pressures in the month ahead. We also view the recent USD 300mn inflows from the World Bank as key for FX supply.

• KENYA
  Fixed Income: The lagged impact of monetary policy squeeze in the prior month was reflected in a weaker demand for Kenyan Treasury bills in March 2024. Despite the month-on-month weakening in investor demand, the total uptake marginally exceeded the T-bill maturities for the month. The pace of m/m increase in nominal yields slowed further in the month under review, supporting our view of peak yields in sight. Against the backdrop of lower annual inflation, we observed a widening in the inflation-adjusted yields on Kenyan Treasury securities.  We thus view these risk-adjusted returns on Kenyan securities as sufficiently attractive to lock-in ahead of a potential downturn in yields.
  
  Currency: The Kenyan Shilling extended its gains from the prior month into March 2024 as investor sentiments turned positive amidst the reduction in the risk of sovereign default and FX convertibility. We observe buoyant FX turnover volumes in the interbank market in the past 2-months, ostensibly with the USD as net-offered, translating into 8.9% m/m gain for the KES (+18.7% YTD) in March 2024. Looking ahead, the 1-month USDKES forward mid-rate of 134.8/USD indicates a modest depreciation ahead, suggesting that the appreciation trend may be close to its peak.

• NIGERIA
  Fixed Income: Investor demand for Nigerian Treasury bills (NTBs) declined for the 2nd consecutive month as Naira liquidity wanes on the back of the tighter monetary policy stance. While the 91-day and 182-day stop rates declined, the 364-day stop rate surged 212bps m/m to 21.1%, culminating in a significant steepening of the NTB curve. Following the latest policy rate hike, we expect yields to remain elevated in the double digits throughout 2024 as the authorities seek to restore positive ex-post real yields and attract foreign portfolio inflows in the short-to-medium term.

  Currency: The Nigerian Naira rebounded strongly across the official and parallel markets in March 2024 as the Central Bank cleared valid outstanding FX obligations, resumed FX sale to Bureau De Change operators, and sustained its hawkish stance. In view of the improving foreign portfolio interest amidst the higher yields and enhanced policy credibility, the 1-month USDNGN forward rate (1,308.3/USD) suggests further appreciation for the Naira.