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Nigeria and Kenya inching closer to interest rate cuts

Comments (0) Actualites, Africa, Economy

JOHANNESBURG (Reuters) – Nigeria and Kenya will follow Ghana’s lead and cut rates in the third quarter, a Reuters poll found, as long as there is a monetary committee quorum in Abuja and an easier commercial lending policy in Nairobi.

A Reuters poll of 11 analysts for some of Africa’s major central banks, taken in the past four days, found the majority saying Nigeria and Kenya’s benchmark rates will remain at 14.0 and 10.0 percent respectively next week.

Eight of the 12 members still need to be appointed to Nigeria’s Monetary Policy Committee (MPC) – so there is unlikely to be a meeting next week – while Kenya remains hamstrung by a bill limiting commercial lending rates to 4 percentage points above its official rate.

Nigeria’s central bank was forced to cancel its January meeting as it was unable to reach a quorum. But the Senate plans to start screening new members for the interest rate committee after it held up some of President Muhammadu Buhari’s nominees in a political spat.

Inflation in both Nigeria and Kenya slowed recently, making both ripe for easier policy, and according to the poll there will be 200 and 100 basis points worth of cuts coming this year, respectively.

“There is a case for policy loosening in Nigeria and Kenya, but inflation in Nigeria has been stickier at least until February and the delay in appointing new members of the MPC has also held up policymaking,” said John Ashbourne, Africa economist at Capital Economics.

Nigeria has navigated several challenges in the past three years, dealing with dollar shortages and an economy that came out of its first recession in a generation in 2017.

But growth in the last quarter of 2017 rose to 1.92 percent compared to a 1.73 percent contraction in the same period of the previous year.

On Wednesday the International Monetary Fund approved a request by Kenya to extend by six months a stand-by loan that was due to expire at the end of March, giving it time to finish mandatory reviews.

Amending a bill on interest limits for commercial bank loans is one of the conditions the IMF needed to approve the “rainy day” loan facility and so an amendment could happen soon, said Aly-Khan Satchu, CEO of Rich Management in Nairobi.

The bill meant banks decided a large number of borrowers – mainly small traders and informal sector workers – were too risky to receive loans.

Unless the bill is scrapped or modified to take advantage of slower inflation and rates fall further, banks are likely to exclude yet more would-be borrowers from credit – effectively tightening rather than easing monetary conditions.

After 600 basis points worth of cuts in the past two years, Ghana is expected to press on and cut 100 basis points to 19.0 percent later this month and then continue chopping until it reaches 17.0 percent by end-year.

South Africa, Africa’s most industrialised economy, is also closer to cutting rates this year but it depends heavily on a decision by Moody’s ratings agency later this month. [ECILT/ZA]

(By Vuyani Ndaba)

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Google starts taking payments for apps via Kenya’s M-Pesa service

Comments (0) Actualites, Africa, Business, Economy, Technology

NAIROBI (Reuters) – Google Play apps and games store has started accepting payments in Kenya through Safaricom’s mobile phone M-Pesa service to boost downloads in a market where many people do not have a credit card.

M-Pesa, which enables customers to transfer money and pay bills via mobile phone, has 27.8 million users in the nation of 45 million people where Google’s Android platform dominates. M-Pesa has been mimicked across Africa and in other markets.

“This is very important to the developer ecosystem in markets where credit card penetration is low,” said Mahir Sain, head of Africa Android partnerships at Google, which is owned by Alphabet Inc.

Safaricom has 13 million smart phones on its network, most of them using the Android platform. It partnered with London-based global payments platform provider, DOCOMO Digital, to enable users pay through M-Pesa, both firms said on Thursday.

Safariom started M-Pesa in 2007, offering money transfer services between users. It has grown to allow users to make payments for goods and services through thousands of merchants.

It also allows users to save, borrow and buy insurance, through partnerships with commercial banks.


(Reporting by Duncan Miriri; Editing by Edmund Blair)


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Kenya raises $2 bln Eurobond but concerns over deficit linger

Comments (0) Actualites, Africa, Economy, Infrastructure, Politics

NAIROBI (Reuters) – Kenya shook off a downgrade and the loss of access to an IMF standby credit facility to raise a $2 billion dollar bond at competitive yields, but market participants said on Thursday it still needs a credible plan to tackle its fiscal deficit.

Kenya received $14 billion worth of bids. It took just $1 billion in a 10-year note with a yield of 7.25 percent, and another $1 billion in a 30-year tranche with a yield of 8.25 percent, Thomson Reuters news and market analysis service IFR reported.

“They were in line with the yield curve,” said a fixed income trader in Nairobi.

The eventual yield reflected a tightening of the initial pricing area by about 30 basis points. It was close to the comparative yields for other African sovereigns like Nigeria, the trader said.

Last week, credit ratings agency Moody’s downgraded Kenya’s debt rating to B2 from B1 while officials were in the middle of the bond roadshow abroad, angering the government.

More bad news emerged on Tuesday, after the International Monetary Fund said it had frozen Kenya’s access to a $1.5 billion standby facility last June, after failure to agree on fiscal consolidation and delay in completing a review.

“They (the government) were able to weather the knocks of the Moody’s downgrade and the IMF issue,” said Aly Khan Satchu, a Nairobi-based independent trader and analyst.

But he warned that the government needed to convince investors it has a plan to tackle the fiscal deficit.

“People are worried about debt-to-GDP ratios and they want to see a stronger language about how this will be addressed,” he said.

Kenya’s total debt is about 50 percent of GDP, up from 42 percent in 2013. It has borrowed locally and abroad to build infrastructure like a new railway line from Nairobi to the port of Mombasa.

The finance ministry has published a plan to lower its fiscal deficit to 7 percent of GDP at the end of this fiscal year in June, from 8.9 percent in 2016/17, and to less than 5 percent in three years’ time.

Satchu said it was not enough for investors. They want to see more targeted infrastructure investments that will ensure a return, and attempts to reign in a ballooning public service wage bill and other recurrent expenditure.

“We have got to walk the talk. We are not even talking the talk yet,” he said.


(By Duncan Miriri. Editing by Katharine Houreld and Toby Chopra)

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IMF: Kenya’s $1.5 bln standby credit in place, but not accessible

Comments (0) Actualites, Africa, Economy

NAIROBI (Reuters) – Kenya’s $1.5 bln standby credit facility remains in place until the end of March 2018, but the country cannot access it because conditions have not been met, the International Monetary Fund said on Wednesday, clarifying comments given a day earlier.

“The precautionary… arrangement remains in place until end-March 2018,” the IMF said in a statement.

“Kenya continues to have access to resources since June subject to policy understandings to complete the outstanding reviews.”

On Tuesday, Jan Mikkelsen, IMF representative in Kenya, told Reuters that access to the two-year precautionary facility was lost in June because a review had not been completed due to Kenya’s extended election season.

The two-year precautionary facility, set to expire next month, was put in place in case of unforeseen external shocks that could put pressure on Kenya’s balance of payments.

The East African economy has not tapped the facility, which was preceded by a smaller standby one-year credit line in 2015, as foreign exchange reserves held by the central bank have soared to record highs.



“The facility is in place but permission to access it has been withdrawn,” said Kenyan economist Anzetse Were. “This comes at a bad time… we’ve seen Moody’s downgrade us to B2 from B1, and this is particularly important in the context of Kenya trying to raise a Eurobond.”

Senior government officials have just finished a marketing roadshow abroad, and they plan to issue dollar-denominated notes for a minimum of $1.5 billion soon.

The IMF has expressed concern over the fiscal deficit, but government officials have said borrowing is necessary to fund the government’s ambitious infrastructure plans, which were a key plank of President Uhuru Kenyatta’s successful re-election campaign.

Kenya’s total debt has risen to about 50 percent of GDP, from 42 percent in 2013, as it borrowed locally and abroad to build infrastructure like a new railway line from Nairobi to the port of Mombasa.

When Kenya secured the precautionary facility, IMF officials said it was recognition of the country’s stable economic fundamentals, as that type of facility is usually reserved for more developed emerging economies.


By Duncan Miriri

(Writing by Katharine Houreld; Editing by Simon Cameron-Moore)


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Kenya cuts electricity tariffs for manufacturers to create jobs

Comments (0) Actualites, Africa, Economy

NAIROBI (Reuters) – Kenya is cutting night-time electricity tariffs for manufacturers by half to entice investors and boost economic growth and job creation, a top ministry of energy official said on Wednesday.

The East African nation charges firms 15.70 shillings ($0.1522) per kilowatt hour, which is seen as uncompetitive compared with other African nations such as Ethiopia, South Africa and Egypt.

Joseph Njoroge, the principal secretary in charge of electricity at the ministry, said the reduction will apply from 10 pm to 6 am every day to boost usage of electricity when most households and businesses shut down.

“It is about, how do we create jobs for our people? How do we grow as a country? How do we move from an agro-based to an industrial-based country so that we can be able to enhance our GDP,” he told Reuters on the sidelines of an energy conference.

During his inauguration for a second term, President Uhuru Kenyatta said he planned to increase the share of manufacturing to annual economic output to 15 percent from 9 percent.

The government has been trying to boost investments in the sector in recent years with modest success, including the opening of light vehicle assembly plants by Peugeot and Volkswagen.

Taxes account for about a third of electricity tariffs and Njoroge said they will consider whether some of the charges can be reduced.

Kenya has an installed electricity capacity of 2,336 megawatts (MW) with maximum demand of 1,727 MW, Njoroge said. It has increased the share of the population with access to electricity to 70 percent in the last four years from 30 percent.


($1 = 103.1500 Kenyan shillings)


(Reporting by Duncan Miriri, editing by Louise Heavens)


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Africa’s major central banks embarking on policy easing cycle ride

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By Vuyani Ndaba

JOHANNESBURG (Reuters) – Africa’s major central banks are entering an easing cycle as they try to stimulate growth after months of drought, austerity drives and confidence issues across the continent, a Reuters poll found on Thursday.

Much of southern and eastern Africa is still recovering after an El Niño-related drought wilted crops last year. Poor business confidence in South Africa and foreign exchange restrictions in Nigeria have also hampered growth.

“We expect that African monetary policy is entering a widespread and protracted period of policy easing. This will provide a boost to growth,” said John Ashbourne, Africa analyst at Capital Economics.

Ghana, which agreed a three-year fiscal discipline deal with the International Monetary Fund in exchange for aid in 2015, cut 100 basis points from its benchmark interest rate in May and is expected to do the same on Monday, putting it at 21.50 percent.

Medians in the poll predict South Africa will make a first quarter trim of 25 basis points to 6.75 percent and while Kenya will hold steady on Monday it is expected to cut 100 basis points to 9.00 percent in the second quarter of next year.

Nigeria is expected to hold rates at 14.0 percent on Tuesday, and through this year, but will reduce borrowing costs by 175 basis points across 2018.


Aly-Khan Satchu, CEO of Nairobi-based Rich Management said policymakers in Africa’s biggest economies have lost credibility and it would be difficult to regain that.

To try to reduce demand for dollars, Nigeria banned the importing of 41 items, but that only fuelled the gap between the official and black market rates for its naira currency.

The policy, alongside a commodity price slump that hurt oil exports, has since 2015 forced its central bank to hike the benchmark rate 300 basis points to 14 percent as it tried to deal with much faster inflation and restore the currency’s strength.

Nigeria — Africa’s biggest economy — fell into recession for the first time in 25 years in 2016 but is expected to turn in growth of 1.0 percent this year and 2.5 percent the following.

South Africa is expected to expand 0.7 percent this year after escaping a six-month recession last quarter that was partly due to weak confidence and drought.

Confidence in South Africa’s economy has been sapped by the chopping and changing of finance ministers four time since the end of 2015 by President Jacob Zuma. The last change in March triggered a credit rating downgrade to “junk” status.

Kenya is expected to grow 5.2 percent this year and 5.9 percent next.

Growth slowed to 4.7 percent in the first quarter, hit by a credit slow down after authorities late last year capped the interest banks could charge on loans.

However, Ghana is expected to fare better than most, growing 6.1 and 6.8 percent in 2017 and 2018 respectively, supported by the IMF programme, recovering from 3.5 percent last year.

On Tuesday, President Nana Akufo-Addo said Ghana would not extend its three-year aid programme with the IMF beyond April 2018, but the fund urged it to do so to allow time to complete the programme’s goals.



(Editing by Jonathan Cable/Jeremy Gaunt)


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Kenyan shilling inclined toward depreciation as oil demand weighs

Comments (0) Latest Updates from Reuters

NAIROBI (Reuters) – The Kenyan shilling was broadly stable against the dollar on Monday, but some demand from oil and merchandise importers was seen giving the local currency a depreciation bias, traders said.

At 0757 GMT, commercial banks quoted the shilling 103.30/40 per dollar, compared with 103.25/45 at


(Reporting by John Ndiso; editing by Elias Biryabarema)


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Kenya government to guarantee $750 million in Kenya Airways debt

Comments (0) Latest Updates from Reuters

By Duncan Miriri

NAIROBI (Reuters) – Kenya will offer $750 million in guarantees to Kenya Airways’ existing creditors to help the heavily-indebted carrier secure financing from other sources to complete its recovery, a cabinet document showed on Tuesday. The guarantees, approved by the cabinet, will cover $525 million owed to the U.S. Exim Bank and the rest to local lenders, said the document seen by Reuters.

The airline, partly-owned by Air France KLM and the Kenyan government, has struggled to return to profit after tourist traffic slumped four years ago following a spate of attacks by Somalia-based Islamist militants.

The government will also convert its existing loans to the carrier into equity, it said. It was not immediately clear how much it has lent the carrier, but a source at the airline said it was a “significant” amount lent over time. The plan to guarantee the existing debt will be taken to the National Assembly for approval, the government said.

“The guarantees would be in exchange for material concessions to be provided as part of the financial restructuring which would secure future funding for the company,” the cabinet document said, without giving details on the concessions.

The government views the airline as a strategic asset, supporting other industries such as tourism and encouraging investments from abroad. Several international firms have set up their regional headquarters in Nairobi to take advantage of Kenya Airways’ extensive route network on the continent. Kenya Airways ferries 12,000 passengers a day on its fleet of Boeing and Embraer planes to destinations such as Juba and Accra.

At 1012 GMT, Kenya Airways shares were down 1.5 percent at 6.65 shillings.

The government would not provide additional cash as part of the restructuring of the airline, it added.

The debt owed to the U.S Exim bank is related to the financing of the purchase of the carrier’s Boeing planes. Kenya Airways says the financial restructuring will involve restructuring debt and securing additional capital to help dig itself out of a position of negative equity, and attain a better balance between cash flow and debt repayments.


(Reporting by Duncan Miriri; Editing by Elias Biryabarema and Mark Potter)


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Kenya’s finance minister opposes capping of banks’ lending rates

Comments (0) Africa, Business, Latest Updates from Reuters

NAIROBI (Reuters) – Kenya’s Treasury opposes a move by parliament to cap commercial lending rates because other measures being put in place will help bring down borrowing costs over time, the finance minister said on Tuesday.

Parliament passed changes to the banking law two weeks ago to cap commercial interest rates at 400 basis points above the central bank’s policy rate, now 10.5 percent. The changes are awaiting presidential approval.

Henry Rotich, the finance minister, told Reuters his ministry preferred to improve the transmission of monetary policy signals to commercial rates and the creation of a central registry for collateral to cut rates, rather than capping them.

“Our approach in this issue is to deal with the root cause of why interest rates are where they are in Kenya,” he said.

The average lending rate was 18.2 percent last month, compared with 15.8 percent in July last year, the central bank said. The central bank cut its policy rate to 10.5 percent in May, having left it at 11.5 percent since July 2015.

Rotich said they were working to improve the Kenya Banks Reference Rate (KBRR) to ensure banks were pricing loans correctly.

Introduced by the government in 2014 to help rein in high costs of loans by offering a benchmark for banks to price their loans, the KBRR has been criticised widely for failing to help bring down interest rates.

“There is more room for refining the KBRR and banks are working on ensuring that the margins reflect the best pricing of loans,” the minister said without offering details.

He said a law to establish a central registry of collateral would be taken to parliament soon, enabling borrowers to transfer their loans between different banks easily and cutting costs of securing collateral once it is passed.

“We think these measures are going to help to bring down rates over a period of time,” Rotich said.

Kenyan banks have reported rising profits in the last decade, attracting foreign investors. Rotich said the growth of the sector had helped to boost the share of the population with access to formal financial services to 70 percent.

“We don’t want to rock that boat … Anything that reverses that would not be a good way to go,” he said.

The central bank also opposes capping interest rates saying it could restrict lending. It however wants banks to lower their rates.

Rotich said the government’s budget deficit for the fiscal year starting last month would be lower than the 9.3 percent approved by parliament, adding they would also raise money in capital markets abroad to avoid putting pressure on local rates by borrowing too much in the domestic market.

“Our strategy is to diversify our sources of funding so that we don’t borrow heavily domestically,” the minister said.

(By Duncan Miriri, Editing by Richard Balmforth)


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Strikes unlikely to curb Kenya tea output

Comments (0) Africa, Business, Latest Updates from Reuters

NAIROBI (Reuters) – Several weeks of strikes by tea pickers in Kenya’s biggest estates in June and July are unlikely to disrupt production enough to warrant a change to the forecast for the year, the agriculture industry regulator said on Thursday.

Tea pickers were awarded a 30 percent pay increase by a court in June but went on strike when tea estate owners refused to pay, saying it would drive up costs and deter investment.

Tens of thousands of pickers in the major growing regions of Nandi and Kericho went on strike in protest. Pickers have since returned to work after the Labour Ministry brokered a deal allowing the award to be implemented in two phases.

The East African nation, the world’s No. 1 exporter of black tea, expects output to jump to as much as 450 million kg this year, thanks to good rainfall, from 399 million in 2015. Tea is one of Kenya’s top foreign-exchange earners.

“There is no change to the output forecast,” Alfred Busolo, acting director-general of the Agricultural, Fisheries and Food Authority told Reuters, adding that the impact of the stoppages was “minimal”.

The government is working to remove numerous levies and taxes on the tea industry to make its exports more competitive.

The labour stoppages had mainly affected big tea estates in the Rift Valley region, which account for 40 percent of production. The rest comes from small-scale farms.



(Reporting by Duncan Miriri; Editing by Edmund Blair and Dale Hudson)

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