Sharp Daily
No Result
View All Result
Monday, September 22, 2025
  • Home
  • News
    • Politics
  • Business
    • Banking
  • Investments
  • Technology
  • Startups
  • Real Estate
  • Features
  • Appointments
  • About Us
    • Meet The Team
Sharp Daily
  • Home
  • News
    • Politics
  • Business
    • Banking
  • Investments
  • Technology
  • Startups
  • Real Estate
  • Features
  • Appointments
  • About Us
    • Meet The Team
No Result
View All Result
Sharp Daily
No Result
View All Result
Home Investments

Navigating inflation and currency risks in African investments

Malcom Rutere by Malcom Rutere
June 10, 2025
in Investments
Reading Time: 3 mins read

Inflation describes the general increase in prices over time. In Africa, inflation tends to be higher and more volatile compared to other developed continents such as Europe and America. It is caused by factors such as supply chain disruptions, for instance, the Russian-Ukraine war caused the price of fuel to increase drastically which even led to fuel shortages in countries such as Kenya, Currency depreciation, for instance, if the Kenyan shilling depreciated against the dollar, cost of commodities such as fuel and electronics would rise since we normally import a significant size of consumption goods and price volatility in foodstuff. Since agriculture is an integral part of most economies in Africa, it’s vulnerable to climate changes such as drought and floods. This will lead to low harvests and later food shortages, which will raise the prices of staple food like maize, rice and vegetables.

Inflation affects investments by eroding returns. For instance, in Ghana between 2022 and 2023, an investor in Ghana who invested GHC 30,000.0 earned a 14.3% return on a fixed deposit in 2023 on FNB’s Flexi Fixed Deposit scheme. However, in 2022, the country’s inflation rate peaked at 54.1% during that same time. An investor lost purchasing power, because the return was significantly below inflation. It also undermines returns on fixed income assets like treasury bills and bonds. Since they are fixed in nature they do not adjust to inflation which depreciates the real income in those assets. Factories are also affected by inflation since it increases their input costs such as raw materials. For instance, in 2022, Kenyan manufacturers faced rising costs in commodities such as flour. Companies such as Unga Group saw a decline in their profit margins due to rise in fuel prices. Investors in these firms experienced falling stock prices during this time.

Currency risks describe the probability that fluctuations in exchange rates will adversely affect the value of investments. African countries are mainly sensitive to currency fluctuations attributable to their heavy reliance on imported goods and also foreign loans that are in a foreign denomination. Currency fluctuations are caused by trade imbalances, that is, when imports exceed exports, which causes an increased demand in foreign currency which in turn weakens local currency. Political uncertainties such as policy changes or electoral conflicts may lead to investors and foreign investors to shift their capital investment to foreign and neighbouring countries. External shocks, like rising interest rates in the US, can trigger capital shift from emerging markets.

Strategies to manage inflation and currency risks include diversifying in different asset classes such as money market funds, real estate and bonds. Investing in avenues that are less bound to risk is a viable strategy. Assets such as real estate tend to appreciate and generate rent that can adjust with inflation. Staying informed by subscribing to sites such as Bloomberg enables one to be on the current news and avoid adverse effects of inflation and currency risks.

RELATEDPOSTS

A guide to investing in Africa

June 10, 2025

Kenya’s economic ascent and what it means for East Africa.

June 10, 2025

While inflation and currency risks are still a real threat in Africa, potential investors should not abstain from investing in Africa. With the right research and knowledge, potential investors can easily avoid the adverse effects of inflation and currency risks.

Previous Post

A guide to investing in Africa

Next Post

What the suspension of Skiza Payments means for Kenyan artists

Malcom Rutere

Malcom Rutere

Related Posts

Investments

CMMF at a glance: Competitive returns & easy access for every investor

September 19, 2025
Analysis

Alternative investments: Opportunities and risks

September 12, 2025
Investments

Mid-September momentum: CMMF posts strong yields and growing trust

September 12, 2025
Analysis

Why knowing your pension exit options matters, especially in the public sector

September 5, 2025
Investments

Bank on your paycheck: Invest smart with CMMF

August 26, 2025
Analysis

AI and the future of investment research

August 22, 2025

LATEST STORIES

CMMF at a glance: Competitive returns & easy access for every investor

September 19, 2025

Where do Kenyan stock returns come from? A napkin framework

September 19, 2025

Ways the KRA can leverage technology to stay ahead of smugglers

September 18, 2025

Evaluating Defined Benefits and Defined Contributions

September 18, 2025

Airbnbs or Ubers? The first-time investor in Nairobi

September 18, 2025

Fed cuts rates for first time since 2022

September 18, 2025

Sustainable mixed-use developments in Kenya

September 17, 2025

Real Estate project financing models shaping successful developments

September 12, 2025
  • About Us
  • Meet The Team
  • Careers
  • Privacy Policy
  • Terms and Conditions
Email us: editor@thesharpdaily.com

Sharp Daily © 2024

No Result
View All Result
  • Home
  • News
    • Politics
  • Business
    • Banking
  • Investments
  • Technology
  • Startups
  • Real Estate
  • Features
  • Appointments
  • About Us
    • Meet The Team

Sharp Daily © 2024