Lower commodity prices have caused a slowdown in growth and dollar-denominated earnings in several African countries
A shortage of hard currencies has created major challenges for importers in countries like Nigeria and Angola
Zimbabweans may soon be able to shop in yuan, after their government reiterated that the country will adopt the Chinese currency, following the cancellation of about $40 million in debt.
Since 2009, Zimbabwe has used the dollar and the rand in lieu of its own currency, which it abandoned after hyperinflation of more than 5,000% made it essentially worthless.
This year, several key African currencies have taken a significant hit, as economic growth slows, and falling prices for major export commodities reduce the flow of dollars into the continent.
In Nigeria, the continent’s largest economy, the Central Bank has restricted access to dollars, in an attempt to slow the flight of hard currency out of the country, and to prop up the local currency, the naira.
For countries like Nigeria, which import a lot of their food and refined fuel, this has created serious challenges, as importers buy in dollars and sell in naira, meaning they get less for their money – or they have to charge consumers more. The restrictions on dollars placed on banks and traders mean that some have been unable to pay their suppliers, leading to shipments being held up or diverted.
“I think if you ask people in trading cities like Lagos or Kano right now, they’re not happy. It’s going to be a tough Christmas,” Amy Jadesimi, managing director of the LADOL industrial park in Lagos, says.
The central bank is only “staving off devaluation” of the naira, Jadesimi says, echoing the views of analysts and bankers. “Everybody can see, it’s standing on the edge of a cliff, we can see it’s going to fall.”
Other oil exporters are struggling as well. In Angola, where oil makes up more than 95% of foreign currency earnings, a shortage of dollars has seriously limited the ability of traders to bring in food, manufactured goods and construction materials.
“The market is depressed,” one international trader, based in Luanda says. “It’s a bad time because we don’t have access to the currencies.”
The worst performing currency of the year worldwide, according to Bloomberg data, has been the Zambian kwacha, which lost around 40% of its value against the dollar as the country’s exports plunged. Zambia is heavily dependent on sales of copper, the price of which has slumped by a quarter over the past 12 months.
Ghana’s cedi lost nearly 20% over the year, while in Mozambique, the metical has lost 36%. In the former, a combination of factors, including falling prices for gold and oil, as well as what many see as poor economic management, has led investors to pull out. In the latter, the commodity rout has undermined takings from coal and iron.
Mozambique, like Nigeria, has imposed foreign exchange controls, having already spent around $1 billion to defend the currency, according to some analyst estimates.