April 2024 FX outlook: Egyptian pound and Nigerian naira strengthen post-central bank reforms

The currency landscape for key African economies has shown signs of a promising turnaround in 2024, mainly for Nigeria and Egypt. Given the similarity in their approach to reforms, this report will provide an outlook for these currencies, highlighting the currency risks and opportunities in both markets.

The observed potential marks a significant shift from 2023 when African currencies faced substantial pressure due to the monetary tightening cycle undertaken by the Federal Reserve and European Central Bank. Investors fled to safe-haven assets, predominantly in the United States, leading to currency depreciations across African markets. The Nigerian naira and Egyptian pound experienced notable year-to-date depreciations of 50.1% and 19.9%, respectively.

Extensive structural reforms in the Nigerian and Egyptian foreign exchange markets in 2024 signal a shift from unorthodox policy anchors and negative, accurate interest rates. Nigeria’s central bank has demonstrated a commitment to utilising orthodox and aggressive monetary policy tightening to