African Markets: ZAR Eyes Disinflation Boost as Infrastructure Woes Hit NGN

Divergent narratives are emerging in Africa's two largest economies, driving distinct outlooks for the South African Rand (ZAR) and the Nigerian Naira (NGN).

South Africa: Disinflation Path Widens

Motorists in South Africa are braced for a significant fuel price drop in February. Lower pump prices are a critical input for the South African Reserve Bank's (SARB) inflation model. A sustained drop in transport costs could accelerate the path back to the midpoint of the SARBs target band, opening the door for potential interest rate cuts.

• Market Reaction: USD/ZAR may see selling pressure (Rand strength) if real yield differentials widen, provided global risk sentiment remains stable.

Nigeria: Structural Headwinds Persist

Conversely, Nigeria faces renewed structural shocks. The national electricity grid has collapsed again—the second system failure in the space of a week.

• Productivity Drag: Persistent blackouts force businesses to rely on expensive diesel generation, keeping operating costs high and putting pressure on the NGN through increased demand for FX to import refined fuels. This infrastructure deficit continues to cap the upside for Nigerian assets despite broader macro reforms.