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Q3'22 SSA Update- Policy and the polls

Geopolitics has sent several economies to a dead-end, with high food and energy prices stoking import bills, production costs, and raising inflation expectations. As a result, the International Monetary Fund has downgraded its growth projections for the world at large and Sub-Saharan Africa.

Beyond geopolitics, we see national politics contributing to economic uncertainty over the next five months. In Q3’22, three of our coverage economies were in an electoral season. While Angola and Kenya concluded their Presidential elections in August 2022, Nigeria’s electoral campaign season officially kicked off in September 2022.

Amidst the elevated political environment, fiscal authorities in Kenya recently removed fuel subsidies on account of ailing government finances and elevated oil prices. While Nigeria has transferred the responsibility to the next administration, fuel subsidies continue to take a toll on the fiscal account despite the accretive impact of oil prices on the country’s external position. In our , we opined that the Ghanaian Cedi remains the worst hit by the geopolitical risk while the Angolan Kwanza has been a net-beneficiary of the successive windfalls in oil prices. We see further de-escalation of the Ukraine-Russia war and global monetary tightening as risks that could make SSA sovereigns less appealing to portfolio inflows. With the proposition of domestic debt restructuring in Ghana, investors could remain wary of local and the international debt markets of countries with fragile debt vulnerability indicators.