Atta Africa Financial Update

Executive summary: Sighs of relief as Nigeria signals FOREX reform.

Nigeria’s government bond yields fell across all maturities last week following the central bank's move to keep interest rates on hold and pledge to include a flexible currency policy - a move which is no doubt aimed at luring back international investors.

Most would expect the shift to a flexible interbank market from a de facto peg of around 197 - which the central bank has retained for 15 months - to boost investor confidence and create more dollar liquidity.

In the short term, markets are likely to be volatile as the exchange rate seeks equilibrium. The economy has adjusted somewhat however to a market price consequential to the parallel market and a higher official rate will create inflationary pressures. The country may also see some pain in the banking sector as dollar debt issuers are faced with higher servicing costs.

In the medium to longer-term however, dollar liquidity and certainty should reinvigorate foreign investment and financial support. This shift in policy is a move to clearing the path for World Bank and African Development Bank funding.

Fact: Allegedly a US dollar bill only lasts 18 months before it wears out and should be replaced. Representatives from the US Bureau of Engraving and Printing are yet to visit Harare.

Tanzania stock exchange goes public

  • The Dar es Salaam Stock Exchange has opened up its ownership to the public, allowing individual and institutional investors, including stockbrokers, to acquire up to a 20 per cent shareholding in the 20-year-old bourse
  • DSE chief executive Moremi Marwa told The EastAfrican that no special privilege would be given to the trading participants and that their level of shareholding in the demutualised exchange would depend on their level of interest in the IPO
  • The DSE listing is different from other demutulisations - in Kenya for instance, 21 stockbrokers on the NSE allotted themselves 100 shares each representing 4.76 per cent shareholding in the to-be listed company - the stockbrokers then sold 66 million shares to the public in 2014, reducing their combined stake to around 56 per cent

Nigeria to serve as regional hub for Coca-Cola

  • The Coca-Cola Company has announced a new streamlined international structure to better align its operating units against its global bottling footprint and to promote and develop key Coca-Cola leaders
  • Under the new international structure, Nigeria will now host the newly formed West Africa Business Unit which will based in Lagos and oversee Coca-Cola’s operations across of 31 countries

Key commercial and political activity in Africa for private equity investors by DCE Partners, UK Private Equity advisors to Atta.