E-Financial
FXTM Emerging Currency Outlook 2016
The year that was 2015 saw emerging currencies challenged by a resurgent USD powering up alongside the US economic recovery, which added to the challenges faced by commodity-linked emerging economies amid a global slowdown in Oil and Gold prices and additional concerns over how a slowing down China economy would impact the general sentiment towards the emerging markets.
The results were a clear downward trend for emerging currencies and we continued to highlight emerging market currency weakness as a global phenomenon throughout 2015.
The emerging market currencies which were the most heavily crushed during the year were those that belonged to economies dependent on commodity exports, therefore the Indonesian Rupiah, Malaysia Ringgit and Nigerian Naira fell victim to this.
The USDIDR plunged from 12428 in January to 14733 at the end of the year, while the Malaysian Ringgit exploded into astonishing weakness and the USDMYR sky-rocketed from 3.4950 to 4.4580 by the end of the year.
The Nigerian Naira appeared vulnerable to extreme losses as 2015 commenced, but a controversial move to ban USD deposits likely prevented further currency weakness and at least improved domestic demand for the Nigerian currency.
Another huge contributor behind the losses in the emerging market currencies globally were the intense concerns surrounding the China economy entering a deep slowdown.
From the second half of 2015 we pointed out that a slowing down China economy was not a problem for China itself, but for all those economies reliant on trade with China and this helped the weakness in the emerging markets accelerate as 2015 drew to a close.
From a domestic standpoint, the China economy is still performing and from recent data we can see that there is no hesitance from consumers to spend in retail, and I still believe that citizens living in China will only become concerned by economic weakness if it begins to hurt employment prospects.
The major bright spot for China in 2015 was the Yuan being added to the prestigious SDR basket from the IMF, which underpins how critical China has become to the global economy regardless of its own reduced GDP growth.
Despite the SDR introduction for the Yuan, the trend for the China currency will remain weak throughout 2016.
The SDR introduction is positive for understanding the longer-term prospects for China within the global economy, but it does not prevent the domestic economy from continuing to experience reduced growth in the short to mid-term.
The People’s Bank of China (PBoC) will continue to take measures to improve economic fortunes for China, which we believe will include a gradual further depreciation of the Chinese currency.
This is a strategic move from the PBoC, with the aim of enhancing export competiveness and encouraging consumers to stop looking for products abroad and to instead consume domestically.
If however consumers still chose to import from overseas they will incur higher import costs which will improve another area of concern for the China economy, slowing inflation.
The only emerging market currencies that did not suffer steep losses in 2015 were those that were pegged to the USD, which became very supportive towards the UAE Dirham (AED).
Local equity markets have suffered due to depressed commodity prices as expected, however the losses were not as intense as they could have been due to the USD peg.
While the local economy will encounter lower growth with dramatically lower commodity prices, investors can use the benefits of the USD peg to consume products from abroad, such as with the Euro and Pound, to boost overseas consumption.
As we look towards 2016, the major turning point for all the emerging currencies will in some ways be in response to higher interest rates from the United States, but in my view it will be how they respond to a new environment of reduced economic growth which will be important.
While it is largely true that the reasons behind the huge falls in the emerging market currencies were due to external factors, 2016 could see these external factors transform into internal and domestic pressures such as reduced spending power and reduced budgets that might lead to jobs being lost.
The continued depression in the commodity markets is also going to limit any potential for a recovery in fortunes.
Slowing growth will continue to occur in China and will likely be a threat to India, although it is very possible that the proactive easing of monetary policy from the Reserve Bank of India might encourage borrowing domestically and help drive growth.
It is worth remembering that the central banks in China and India have been actively intervening to shore up their own economies through monetary easing and there will be some hope that this could help drive industry growth and that as commodity importers, the lower import costs should help create budget for investment elsewhere.
As long as the USD strength and commodity price weakness persists, emerging currencies will continue to experience downward pressures into the first quarter of 2016.
Another factor in play is a further increase in the US interest rates, which would likely lead to even more downward pressures on the Chinese Yuan, Nigerian Naira, Malaysian Ringgit, Indian Rupee and Indonesian Rupiah.
I do believe that as the emerging economies begin to encounter their own reduced domestic growth that this could weigh on outflows and threaten demand for their currencies even further.
Any black swan events in emerging economies or increased geo-political tensions in 2016 will also be more than enough to create uncertainties in the markets and this will impact both the emerging and Asian currencies.
The current threat of a possible black swan event would be removing the peg from the Saudi Arabian Riyal, which would create huge uncertainties throughout the GCC and Middle-East markets.
It would also further weaken the outlook for oil prices because market participants would see the move as the Saudi government choosing to devalue its currency rather than cut oil production.
However, it is important to stress that we do not expect such a move as of yet and this is more of a risk that investors could choose to monitor in case it impacts their investment portfolio.
By Jameel Ahmad, Chief Market Analyst at FXTM
David Malpass, former World Bank President, has warned that Nigeria’s increasing reliance on collateral-backed and complex borrowing arrangements could make any future debt restructuring more difficult and discourage investors if the country’s debt position becomes unsustainable.
David Malpass, former World Bank President
Malpass, who was 13th president of the World Bank Group, from April 9, 2019 – June 1, 2023, raised the concern in a World Bank Policy Research Working Paper titled Public Debt and Central Banks, which was based on the Stanley Fischer Memorial Lecture delivered at the World Bank Group’s Annual Bank Conference on Development Economics.
He said increasingly sophisticated collateralised transactions in developing economies, including Nigeria, Angola and Senegal, were creating what he described as “a new race toward seniority in the capital structure.”
In sovereign lending, collateralised creditors may gain priority over other lenders by tying repayment to specific assets, revenues or financial instruments. Malpass warned that the expansion of such arrangements could leave fewer resources available for unsecured creditors and make negotiations more contentious during a debt crisis.
He also questioned the growing use of guarantee products provided by multilateral development banks, arguing that their effectiveness had not been adequately tested during sovereign debt restructurings.
According to him, private lending to distressed or high-risk governments has become less transparent, with some commercial agreements containing non-disclosure clauses that prevent citizens, investors and other creditors from understanding their full implications.
Malpass said debt reconciliation efforts were already being hindered by limited access to sovereign loan contracts, particularly agreements linked to Chinese lending programmes.
The former World Bank chief also criticised the international debt restructuring system, arguing that existing mechanisms had failed to provide timely and meaningful relief to heavily indebted countries.
Beyond debt transparency, Malpass identified exchange rate stability as an important requirement for Nigeria’s economic growth.
He grouped Nigeria with Ethiopia and Egypt among countries where multiple exchange rates and poorly managed currency systems had transferred wealth from low-income earners to politically or economically privileged groups.
He estimated Nigeria’s per capita income at about $1,500, or roughly $4 a day, while noting that median income was likely to be considerably lower because wealth remained concentrated among a small proportion of the population.
Malpass argued that the benefits of credible currency reform could be substantial, pointing to the significantly higher earnings of Nigerians working abroad as evidence of the country’s unrealised productive potential.
He disclosed that, while serving as World Bank president, he held several meetings with Nigeria’s previous administration, cabinet officials and the bank’s Nigeria team to identify reforms capable of accelerating economic growth.
Those discussions highlighted currency stabilisation, exchange rate unification, oil sector reforms, tax changes and agricultural liberalisation, particularly in rice production, as priorities.
Malpass said the reforms could transform Nigeria’s economy in a manner comparable to the policy changes that helped launch China’s sustained period of rapid growth in the 1990s.
Malpass’ warning comes amid continuing scrutiny of Nigeria’s use of unconventional financing to refinance expensive obligations and cover budget deficits.
The International Monetary Fund and Fitch Ratings had earlier raised concerns about the Federal Government’s proposed $5 billion Total Return Swap with First Abu Dhabi Bank, warning that derivatives-based sovereign borrowing could obscure the country’s true debt exposure and complicate future restructuring.
Despite those concerns, Nigeria reportedly accessed an initial tranche of about $1.5 billion from the arrangement.
The controversy follows years of debate over the transparency of Nigeria’s borrowing, including loans linked to crude oil revenues, infrastructure assets and bilateral agreements whose full terms were not always publicly disclosed. With debt-service costs consuming a substantial share of government revenue, the latest warning reinforces concerns that short-term financing relief could create more difficult obligations for future administrations.
Ecobank Nigeria has launched Scaling Up!!!, its flagship business storytelling podcast designed to inspire, educate and empower entrepreneurs, founders, business leaders and the next generation of African innovators through authentic conversations with some of the continent’s most accomplished business personalities.
The podcast, which will be available on Ecobank Nigeria’s official YouTube channel and other major digital streaming platforms, reinforces the bank’s commitment to supporting businesses beyond banking by creating a platform where entrepreneurs can learn from the experiences of successful founders, creatives and industry leaders who have built thriving enterprises across diverse sectors.
Featuring compelling conversations on entrepreneurship, leadership, innovation, resilience and business growth, Scaling Up!!! offers practical lessons and real-life insights that aspiring and established entrepreneurs can apply in building sustainable businesses.
The inaugural season features an impressive lineup of distinguished guests, including beauty entrepreneur and Founder/CEO of Beauty by AD, Adeola Adeyemi (Diiadem); renowned filmmaker and Founder of Golden Effects Pictures, Kunle Afolayan; veteran music producer and Founder of Coded Tunes, ID Cabasa; luxury fashion entrepreneur, Ejiro Amos Tafiri; celebrated commercial photographer, Emmanuel Oyeleke; Co-founder and Lead Interior Designer of Siriano Limited, Adewunmi Adegbola; and Founder of Windsor Gallery and Nahous Creative Hub, Richard Vedelago.
Each episode explores the guests’ entrepreneurial journeys, highlighting the opportunities they embraced, the challenges they overcame and the strategies that enabled them to build enduring brands and successful businesses.
Speaking on the launch, Austen Osokpor, Head, Marketing & Corporate Communications, Ecobank Nigeria, said: “Scaling Up!!! reflects Ecobank’s belief that empowering entrepreneurs goes beyond providing financial solutions.
“Through authentic storytelling and insightful conversations, we are creating a platform where business owners can learn directly from people who have successfully navigated the realities of building sustainable enterprises. It is another way we are reinforcing our commitment to driving entrepreneurship, innovation and economic growth across Africa.”
Also speaking, Head, SMEs, Partnerships & Collaborations, Ecobank Nigeria, Omoboye Odu, said: “Entrepreneurs learn best from the experiences of those who have walked the journey before them. Scaling Up!!! provides practical insights, inspiration and valuable lessons that will help founders make better business decisions, overcome challenges and unlock new opportunities for growth.
“The podcast further strengthens Ecobank’s role as a trusted partner supporting SMEs at every stage of their entrepreneurial journey.”
Sharing the creative vision behind the initiative, the Producer of Scaling Up!!!, Jemimah Ugiagbe, said: “Our goal was to create more than just another business podcast. We wanted honest, engaging and relatable conversations that reveal the realities behind success, the setbacks, the resilience, the bold decisions, and the lessons that every entrepreneur can learn from.
“Every episode is designed to leave listeners informed, inspired and motivated to build businesses that create lasting impact.”
The podcast further strengthens Ecobank Nigeria’s position as a trusted partner for entrepreneurs by providing a knowledge-sharing platform that extends beyond traditional banking services. GeographicReference
Through meaningful conversations with accomplished founders and innovators, the bank continues to demonstrate its commitment to fostering enterprise development, encouraging innovation and promoting sustainable economic growth across Africa.
Scaling Up!!! is targeted at SMEs, entrepreneurs, founders, startups, business executives, creatives, students and young professionals seeking practical business insights from some of Africa’s most respected industry leaders.
New episodes will be released regularly across Ecobank Nigeria’s YouTube channel and other major podcast streaming platforms, offering audiences thought-provoking conversations on entrepreneurship, leadership, innovation and business growth.
Ecobank Nigeria is a member of the Ecobank Group, the leading pan-African banking institution with operations in 33 African countries and international offices in London, Paris, Beijing, and Dubai.
With over 220 branches, more than 36,000 agency banking locations, and robust digital platforms, Ecobank delivers accessible, affordable, and instant banking services. The bank is strategically positioned to support pan-African trade, particularly under the African Continental Free Trade Area (AfCFTA).
S&P Global has agreed to acquire a majority stake in Agusto & Co., one of Africa’s oldest and largest domestic credit rating agencies, in a move that signals growing international interest in the continent’s capital markets and credit ecosystem.
According to a joint statement by the rating agencies. The transaction, which is subject to regulatory approvals, will give the global ratings giant a stronger foothold in Africa through Agusto & Co.’s operations in Nigeria, Kenya, Ghana, and Rwanda. Financial terms of the deal were not disclosed.
The acquisition marks one of the most significant investments by a global ratings agency in Africa’s domestic credit ratings market in recent years and comes as governments and companies across the continent increasingly rely on local debt markets to finance infrastructure, corporate expansion, and fiscal deficits.
Yann Le Pallec, president of S&P Global Ratings, said the investment reflects the company’s long-term commitment to Africa’s financial markets.
“We are delighted to partner with Agusto & Co. to strengthen our domestic ratings presence across Africa,” Le Pallec said. “This transaction underscores our commitment to supporting growth and transparency in local credit markets throughout the continent.”
He added that combining S&P Global’s international analytical capabilities with Agusto & Co.’s local market knowledge would help improve credit transparency and support investor confidence across African markets.
Founded more than three decades ago, Agusto & Co. has built a reputation as one of Africa’s leading domestic rating agencies, providing credit ratings on banks, corporates, and other institutions. The company has expanded beyond Nigeria into several African markets and has played a key role in the development of domestic bond markets.
For Agusto & Co., the transaction represents a major milestone in its growth strategy and fulfills a long-held ambition to align with a global ratings institution.
“This partnership is a transformational milestone for Agusto & Co. and African capital markets, fulfilling our late founder’s vision of affiliating with a leading global rating agency,” said Yinka Adelekan, managing director of Agusto & Co.
According to Adelekan, the combination of Agusto’s regional expertise with S&P Global’s international resources and analytical network is expected to create broader opportunities for issuers and investors while supporting more transparent and resilient credit markets across Africa.
Despite the ownership change, Agusto & Co. said it will continue operating as an independent domestic ratings agency, maintaining its own rating methodologies and issuing ratings under applicable regulatory frameworks.
That structure is expected to preserve the agency’s regulatory standing in the jurisdictions where it operates while enabling it to benefit from S&P Global’s technology, research capabilities, and global market expertise.
The acquisition also reflects increasing global interest in Africa’s capital markets, where governments are pursuing domestic borrowing strategies and private companies are seeking alternative sources of long-term financing amid tighter global liquidity conditions.
The transaction is expected to close in the second half of 2026, subject to regulatory approvals and other customary closing conditions. S&P Global said the acquisition is not expected to have a material impact on its financial results.
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