Africa’s exchange rates have appeared surprisingly stable in recent months, but that calm is largely engineered through policy intervention rather than pure market forces.
Across West, East, and Southern Africa, currencies such as the Nigerian naira and Ghanaian cedi are trading steadily against the dollar — yet the apparent tranquility masks deeper fragilities that asset traders and emerging markets investors cannot ignore.
From Abuja to Accra and Nairobi, central banks have increasingly deployed a mix of foreign exchange interventions, liquidity controls, and administrative measures to keep currencies within desired ranges — even as underlying macroeconomic pressures persist.
This “managed stability” obscures real demand–supply dynamics and can create false confidence among traders, according to market analysts.
In markets where foreign exchange is tightly rationed or smoothed, official figures may not reflect the full picture of currency stress. The result? Investors might believe FX risk is contained — until a sudden shock reveals otherwise.
Calm on the surface, pressure underneath
Currencies across Africa have been forecast as broadly stable against the dollar, supported by central bank actions and modest inflows. In July 2025, Nigerian, Ghanaian, Ugandan, Kenyan , and Zambian currencies were all expected to hold steady against the U.S. dollar in weekly trading, according to traders.
But closer inspection shows this “stability” is not always market-led. In Nigeria, for example, the central bank has been actively intervening — selling dollars and supporting liquidity — even as traders forecast limited movement in the naira.
Similar patterns have been seen in Ghana, where the Bank of Ghana’s interventions have tempered pressure on the cedi.
Other countries, such as Kenya, are transitioning towards freer floating regimes, but this process takes time and comes with its own risks, including periodic bouts of volatility and reliance on external inflows such as remittances.
The International Monetary Fund and other institutions emphasise that exchange rate flexibility remains important for absorbing shocks, but they also acknowledge that interventions may be appropriate in times of acute stress, particularly when markets lack depth or reserves are limited.
For traders, this presents a dilemma: headline stability figures paint a reassuring picture, but the underlying reality is far murkier. Markets that seem calm can quickly become volatile when interventions pull back, capital flows reverse, or external shocks hit.
The illusion of stability and what traders should watch
Reserve positions and intervention limits.
Foreign exchange reserves act as a buffer that allows central banks to intervene. Nigeria’s reserves, for example, expanded significantly in recent years — a rare bright spot that has bolstered FX support. In early 2025, Nigeria reported its net FX reserves at a three-year high, signalling a deliberate policy to reinforce confidence.
Depth of FX markets.
Traders should distinguish between currencies that are truly market-driven and those sustained by periodic central bank sales. Deeper interbank markets tend to be more resilient; shallow markets are more fragile.
Policy shift signals
Emerging markets watchers need to track announcements for changes in intervention patterns. Even small shifts in official behaviour can signal rising risk before prices move dramatically.
External shocks
Commodity price swings, global rate moves, or sudden stops in capital flows can expose latent stress. A currency that is artificially anchored today may face rapid devaluation when support wanes.
Africa’s currency landscape is more nuanced than it appears. What looks like stability to the casual observer is often a calibrated balancing act — central banks smoothing rough edges, managing liquidity, and rationing FX in the absence of deep, market-driven exchange rates.
For investors and traders in emerging markets, the key takeaway is that Africa’s FX calm may be engineered rather than earned. That distinction matters: when interventions ease or external pressures mount, volatility may burst through the seams of perceived stability — and those watching from abroad might be caught off guard. Understanding the engineered nature of current FX stability is therefore essential for pricing risk accurately and anticipating market inflection points in Africa’s fast-evolving frontier economies.
