African commodities and currencies in 2015: What is happening?

Dear Africa Interested Individuals:

                                                        I will take a look at major foreign exchange earners for select African countries and how their currencies have fared against the U.S. Dollar.  

The major foreign exchange earner for Ethiopia is Coffee.  Coffee prices have dropped approximately 9% over the past six months while the Ethiopian Birr has declined approximately 3% against the dollar over the same period.  

The major foreign exchange earner for Kenya is Tea (has bounced back and forth between tourism and tea over the years.)  Tea prices (based on my source) have risen by about 46% over the past six months.  The Kenyan Shilling has declined 11% against the dollar over the same period.  

The major foreign exchange earner for Algeria is Crude Oil.  Crude oil prices have dropped approximately 15% so far in 2015 while the Algerian Dinar has declined 7% against the dollar over the same period.  

The major foreign exchange earner for Nigeria is Crude Oil.  Crude oil prices have dropped approximately 15% so far in 2015 while the Nigerian Naira has declined approximately 8% over the same period.  Nigeria is also the largest sorghum producer in Africa and among the top five in the world.  Nigeria receives remittances in excess of $21 billion (twenty-one billion dollars) annually.  For over a year now, these remittances cannot be received in dollars.  This makes remittances a key source of foreign exchange for Nigeria.  In all fairness, Nigeria should be able to manage dollar demand at current levels successfully, once sharp practices are nullified.  Export of agricultural products like sorghum, millet etc. should be intensified.          

The major foreign exchange earner for Angola is Crude Oil.  Crude oil prices have dropped approximately 15% so far in 2015 while the Angolan Kwanza has declined approximately 19% over the same period.  

The major foreign exchange earner for Zambia is Copper.  Copper prices have dropped approximately 13% so far in 2015 while the Zambian Kwacha has declined approximately 16% over the same period.  

The major foreign exchange earner for Malawi is Tobacco.  Tobacco prices have largely remained flat year-on-year but, have risen approximately 35% so far in 2015.  The Malawian Kwacha has declined approximately 4% over the same period.  

The major foreign exchange earner for Gambia is Tourism.  The Gambian Dalasi is Africa's best performing currency against the dollar in 2015 with an appreciation of 9%.  About 80% of the country's export earnings are re-exports which do not incur import duties.      

The major foreign exchange earner for Egypt is the Suez Canal (at times it has been tourism.)  The Egyptian Pound has declined approximately 10% over the first six months of so far in 2015.  The price declines occurred over a 21-day combined period in 2015 which reflects a calculated action by the Central Bank of Egypt hopefully to boost tourism by making trips cheaper for intending tourists.   

Ethiopia, Gambia, Egypt, Algeria, Nigeria and Malawi have done well to manage their currencies against the globally appreciating US dollar courtesy of low oil prices which has increased demand for the greenback.  The countries not dependent on global volatility in commodity prices for their number one foreign exchange earner appear to have more control over their currency movements against the US dollar e.g. Gambia and Egypt.  Uganda is clearly an outlier here as its top two foreign exchange earners are Tourism and foreign exchange remittances; the currency has declined 19% so far in 2015 nonetheless.  The countries that export soft commodities appear to have an easier ride managing their currency volatility against the dollar relative to countries that export hard commodities. 

Countries with huge tourism potential (e.g Uganda that has the most diverse bird species in the world) appear comfortable with their currencies depreciating hoping that it will attract more tourists to the country especially as oil prices are currently low.  I see similar trends in Kenya (down 11% in 2015 despite the appreciation in tea prices,) Tanzania (down 18%) and the Zambian Kwacha that is down in excess of 16% so far in 2015 despite copper prices reducing by 13% approximately over the same period.  This will be a continual battle for African countries that receive a significant portion of their foreign exchange earnings from tourism.  Close monitoring must be done between the decline in oil price (benefit to countries that are net importers of crude oil byproducts) and the devaluation of the currency if the potential benefits of devaluation to boost tourism are to be harnessed.

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