The country’s inflation dropped to 3.3% in March from 3.4% in February, driven by a reduction in food inflation which dropped to -0.4% from 0.5%. Still, the policymakers maintained that elevated inflation risks persist due to global factors and exchange rate woes.

Michael Atingi-Ego, BoU deputy governor, said in a virtual briefing on Monday that the country’s core inflation is projected to rise between 5.5% to 6% in the next 12 months, and will return to the 5% target in the second half of 2025.

“The evolution of inflation remains challenging, influenced by factors such as the shilling exchange rate, supply-side shocks, global inflation, and domestic food supply. Forecasts have been adjusted downwards to the previous round, largely due to [the] relative stability of the shilling exchange rate,” Atingi-Ego said.

The BoU’s raise is expected to continue shoring up the Ugandan shilling, which has been in a free fall since February. Atingi-Ego said that the shilling’s drop was caused by foreign investors withdrawing funds from Uganda to look for higher yields in other markets.

The local currency, one of the best performing in Africa at the start of the year, has dropped by 4% despite the central bank’s interventions. 

“The recent CBR increase has had a spillover effect of stabilising the shilling exchange rate. However, the shilling remains vulnerable due to outflows of short-term foreign investor funds from the domestic market in search of attractive yield in other markets and strong domestic demand by corporates,” Atingi-Ego said.

The BoU’s growth forecast for the country’s economy for the current fiscal year that ends in June remained at 6% despite the challenging macroeconomic environment.

This adjustment, effective from Q2 2024, is in response to changes in inflation, which remained steady at 3% in Q1, indicating the central bank’s aim to maintain stable prices and promote economic growth.

“The decision of the MPC is based on [the] macroeconomic forecast made in March 2024, which requires an increase in the scope of the monetary policy actions to contain the lingering inflation pressures arising from global economic developments,” said Emmanuel Tutuba, the central bank’s governor.

Tanzania’s economy grew by 5.1% in 2023, up from 4.7% in 2023. Growth in the first quarter of 2024 was also estimated at 5.1%. This growth was supported by increased public investment, especially in infrastructure, that sought to boost the private sector activity and investment.

Q1’s inflation remained under the country’s target of below 5% and regional economic blocs’ convergence criteria. This stability was maintained through monetary policy and sufficient domestic food supply.

As of January 2024, the BOT changed its monetary policy approach from focusing on the quantity of money to using interest rates. At that time, BOT said that an interest rate-based policy might give the bank more control over economic conditions. 

“The implementation of monetary policy in the first quarter of 2024 succeeded in containing the seven-day interbank interest rate within the target band of 3.5-7.5%. Credit was mostly directed to agriculture, mining, transport and manufacturing activities,” BOT said.

Under this framework, the BOT sets the CBR based on alignment with low inflation and support for economic growth. The CBR guides monetary policy, allowing for either tightening or expansionary measures. 

However, it does not fix interest rates offered by banks and financial institutions in Tanzania, which market dynamics will still influence.

On Wednesday, the apex bank noted that the headline inflation eased to 5.7%, the lowest in two years, as the costs of most food items including maize flour, wheat flour, kales, spinach, and cabbages dropped.

The CBK’s Monetary Policy Committee (MPC) exercised cautious optimism despite the shilling rallying against the dollar and inflation easing within the regulator’s 2.5% to 7.5% range.

“The MPC noted that its previous measures have lowered inflation, addressed the exchange rate pressures, and anchored inflationary expectations. Therefore, the MPC concluded that the current monetary stance will ensure that overall inflation continues to decline towards the 5.0 per cent midpoint of the target, and thus decided to retain the Central Bank Rate (CBR) at 13 per cent,” CBK said in a statement on Wednesday.

The Kenyan shilling has rallied 18%, addressing inflation caused by imports. The central bank on Wednesday quoted the shilling against the dollar at KES 131.48 from a record high of KES 160.18 in February–representing a 17.9% appreciation in the past month.

The CBK said that leading economic indicators point to “continued strong performance of the Kenyan economy in the first quarter of 2024,” buoyed by agriculture, the service sector, and ICT.

The March 2024 Agriculture Sector Survey conducted ahead of the MPC meeting indicates that food prices will fall in the next three months supported by favourable weather conditions, stronger shilling, and dropping fuel prices.

Data seen by TechCabal suggests this decline is primarily due to a steady core inflation rate of 3.4% in both periods. The main driver of this core inflation was the rise in service prices, which jumped to 5.5% for the year ending March 2024, up from 5.4% in February 2024.

The increase in service prices was linked to higher passenger transport costs, rising to 2.6% in March 2024 from 1.2% in February 2024. Financial services also saw a significant jump, reaching 13.4% in March 2024, compared to 0% in February 2024. This notable growth in financial service inflation warrants further investigation, and it is unclear if the government has taken specific measures in this sector.

Read more: Kenya’s March inflation drops to 5.7% as KES gains against the US dollar

Inflation for other goods was lower, reaching 1.6% for the year ending March 2024, down from 1.8% in February 2024. Relatively stable prices for most goods drove this slowdown, save for dried kapenta (silver cyprinid), popular local gin (waragi), and goat meat, which saw price increases in March 2024 compared to February 2024.

“Meat prices increased by 14.0 percent in March 2024 compared to 9.3 percent recorded in February 2024,” a report from the Uganda Bureau of Statistics states. 

Energy inflation 

Uganda’s annual energy and fuel inflation slowed to 7.6% in March 2024 compared to 8.0% in February 2024. This moderation was thanks to decreased price increases for charcoal, firewood, and petrol.

At the same time, the slowdown in energy and fuel prices suggests potential government interventions to stabilise fuel prices or promote alternative energy sources.

Between March 2023 and March 2024, Kenya recorded increased costs in transportation (up 9.7%), housing and utilities (up 8.0%), and food and beverages (up 5.5%). However, the cost of these commodities fell in March after the Kenyan shilling posted gains against the dollar, currently trading at KES 132 to the dollar. 

Amidst these gains, the cost of moving goods, maintaining homes, and purchasing essential items remains high, indicating a high cost of living during this period.

“These three divisions [cost of moving goods, home maintenance and purchasing essential items] account for over 57% of the weights of the 13 broad categories,” said the Kenya National Bureau of Statistics (KNBS) in a statement. 

The consumer price indices and inflation rates come from surveys done each month. These surveys examine how much goods and services cost in shops and stores. The KNBS then picks a range of things that Kenyans typically buy. The surveys take place in the second and third weeks of the month and cover different areas across Kenya, with shops chosen to represent what people buy.

Kenya’s central bank (CBK) and others in East Africa are adjusting interest rates to support their struggling economies as they face inflation, currency depreciation, and global supply issues. This implies that there seems to be a change away from using coordinated monetary policies worldwide to control increasing prices.

In February 2024, the CBK raised its policy rate to 13% from 12.5%, the largest jump in 12 years. This move is expected to lead to higher loan costs, impacting borrowers.

“The proposed action will ensure that inflationary expectations remain anchored while setting inflation on a firm downward path towards the five per cent midpoint of the target range, as well as addressing residual pressures on the exchange rate,” said Kamau Thugge, CBK governor, in a statement to the East African.

Headline inflation for February rose to 31.70%, matching audit firm KPMG’s predictions in 2023. 

Food inflation also rose sharply to 37.92%, with staples like bread and yam becoming even more expensive for shoppers. 

“One carton of instant noodles retails at ₦10,000 at wholesale price, over 30% higher than what it began the year with,” said Bethel Ibeh, who runs a small cooking business in Ojodu Berger. 

“Only the people that appreciate the value of instant noodles buy it now,” she added. 

On February 27, the Central Bank raised interest rates to 22.75% in its first meeting since 2023. It was seen as many as a sign of seriousness by the bank, and difficult but necessary decisions like this are beginning to bear fruit.

Last week, the regulator said foreign inflows rose to $2.3 billion in February, driven by renewed interest from foreign investors and a rise in overseas remittances. This figure in the first quarter of 2024 outperformed $3.9 billion received for 2023.

CDCare is one of the major BNPL providers in Nigeria, alongside CredPal, Zilla, and Carbon Zero. They operate in a market where retail credit is in its very early stages. In 2023, only about 6-10.5% of Nigerians formally accessed a loan, with the rest having to borrow from family and friends.

According to Tobi Odukoya, CDCare’s CEO and co-founder, the effects of inflation on their business have been particularly interesting.

“We have seen a lot of new customers who now have to spread payment as they cannot afford one-time payment for their wants,” he shared with TechCabal. “There’s now a new set of Nigerians who now have less disposable income and can now only afford to pay in installments what they used to be able to pay for in full.”

At the same time, however, inflation has cancelled out a whole demographic of former middle-class Nigerians who now cannot afford to pay for any wants at all. 

This surprising trend highlights the evolving nature of lending financial products in a challenging economic climate.

This is the same for CredPal, another player in the Nigerian BNPL space which launched in 2018. In a response shared with TechCabal, Fehintolu OlaOgun, CredPal’s CEO, shared that the inflation has driven growth for the company. 

“It has affected the purchasing power of people, but it has also been a driver for growth as people are more interested in spreading payments as opposed to paying in full,” he wrote.

He, however, shared that the startup is incredibly critical of this high demand and has employed even more stringent measures to confirm the eligibility of customers. Prior to this, KYC requirements for CredPal were work details like office address, salary range, salary date, and other personal information. Now, users are mandated to provide functional work IDs before accessing credit. Unlike CDCare, CredPal has a strict credit limit for users and only allows them to purchase items within a stipulated amount based on their credit history or ratings.

The chaotic credit market

Nigeria is not the greatest market for credit and BNPLs are not the only players suffering from this as neobanks and other lending platforms are staggering under the weight of non-performing loans. Carbon and FairMoney, both players in the Nigerian lending space have both seen their profits take a dip as a result of impaired loans. While a part of this can be attributed to the moral standing of individuals, a larger part is perhaps the economic situation in the country.

Prices go up nearly every day, and for the average Nigerian, this destabilizes their finances and leaves them with even less to repay loans.

*Eno, a 24-year-old graphic designer in Abuja, defaulted on the repayment for a laptop she purchased from CDCare in 2023. A six-month repayment plan turned into seven as the amount she allocated to her essentials became insufficient due to the increase in transport fares, forcing her to eat into the funds for repayment. 

“I’m probably banned from the app now,” she shared with a chuckle. “But I really did everything in my power to repay, including trying to borrow from lending apps and asking for a salary advance.”

It took her three weeks past the due date to complete her payment, and in that period, she received a barrage of calls and messages from the platform. 

“I reached out to them via every single platform I could think of. WhatsApp, texts, emails, calls, etc to request for an extension but nothing worked,” she shared. 

CDCare lets users spread payments for as long as one year; delivering the items halfway through the payment cycle. For their vehicle instalment payments, users get up to three years to complete payments. This extended payment period is strategic according to Odukoya, who shared that the repayment rate on their platform is quite high – as high as 90%, he maintained. 

Last week, TechCabal reported that Zilla, another BNPL startup, pulled the plug on its BNPL offering. This came after it faced extended low patronage and complaints from buyers who favoured other platforms like CredPal and CDCare for their longer repayment periods. They allowed a maximum of four months for users to complete payment on items. 

Before BNPL, Odukoya affirms that they’re first an e-commerce company, and that shapes how they’ve structured their platform. Unlike players like CredPal and Zilla which provide a list of vendors in various categories on their app for users to make their pick, they (CDCare) bypass the need for merchants by dealing directly with the biggest distributors. This does two things: help them guarantee the quality of products and ensure lower prices – both of which have been instrumental in helping them stay ahead in the Nigerian BNPL superiority race.

Optimism has been unable to stop the naira’s fall

In January, the International Monetary Fund (IMF) predicted that the inflation rate is expected to drop to 23% this year and consequently 15.5% by 2025, due to the foreign exchange reforms introduced by the central bank. These reforms include monetary tightening which the CBN governor, Yemi Cardoso, disclosed in December 2023. 

In spite of this, the naira has tumbled aggressively in 2024, depreciating 31% to reach N1,400 on January 30. 

Zuleihat Yakwari, who runs a home appliances store in the country’s capital, shared with TechCabal that business is incredibly slow. Most of her customers now prefer to patronize declutter pages on social media where they buy used appliances from people relocating to other countries. The rest, like those who use BNPL platforms, prefer to pay in bits. Sometimes, she has to sell some of her products on declutter pages for reduced prices, because they just need to go.

“People are no longer paying ₦100,000 for a microwave. They’ll rather buy one another person has used on Instagram for ₦30,000.”

According to Zuleihat, the prices of appliances go up every time she goes to restock, and so the people who insist on brand new appliances, majority of whom are newlyweds or intending couples, have started paying months in advance: an initial deposit to “lock down the item,” and then the rest in bits. 

“As much as the prices are high, people know they will go up even higher, and so a lot of them are now paying very early to avoid regret,” she shared. 

According to him, who shared that they’ve had countless situations where prices increased mid-payment in the past, the way they’ve navigated this has been through continuous and clear communication with customers. So far, the customers have been understanding.

Understanding, however, is not the currency that covers the price difference, and some users have had to cancel their buying plans on the app due to increased prices. 

CDCare offers a car financing plan, which offers customers up to three years to pay for their vehicles. Unlike their other products, car financing is only available to people resident in Lagos. 

Adedeji Olowe, a finance expert, is not convinced that this is a great market for large payments like cars, as other lenders are already shutting down.

“The current macroeconomic situation does not permit digital lenders to make such offerings,” he shared.  

As Nigerian BNPL startups navigate the country’s inflation and economic uncertainties, the dynamics of consumer behaviour are shifting depending on their economic class. While they’re seeing an entire category of buyers being phased out as a result of reduced purchasing power, they’re also witnessing growth amidst the demand for instalment payment options. This growth path is one to be treated with both optimism and caution, as it ultimately depends on the broader economic narrative, which is currently shaky. 

Data from the National Bureau of Statistics (NBS) showed that headline inflation for January, which tracks the prices of food, energy and other commodities, rose to 29.90%. 

Food prices also rose sharply. The prices of staples like bread and yam rose as many shoppers sought more cost-effective alternatives to feed. January’s food inflation figure was 35.41%.

“The CBN has not achieved its inflation target of 6-9% since 2014, and it has even abandoned the target,” said Adedayo Bakare, an investment analyst at Money Africa.

“It has been devastating to households and businesses. The result is high and increasing poverty due to weak purchasing power, weak employment and weak growth.”

Olayemi Cardoso, Nigeria’s Central Bank governor, has repeatedly promised to tackle inflation but he has consistently been light on details. At the Nigerian Economic Summit Group (NESG) last month, Cardoso estimated headline inflation would decline to 21.4% in 2024 due to the CBN’s inflation-targeting policy.

However, the results of this policy are yet to be seen. In the past month, he has paid more attention to reforming the foreign exchange market and easing a dollar scarcity that has created a backlog of unmet demand estimated at $2.2 billion.

The CBN is expected to raise interest rates at its next Monetary Policy Committee (MPC) meeting on February 26-27, 2024, with analysts anticipating an increase of 500 basis points, to combat Nigeria’s inflation estimated at nearly a three-decade high.

This month, the CBN sold one-year bills at a yield above the benchmark interest rate, implying a possible hike at its next meeting scheduled in two weeks. Meanwhile, the Federal Government is mulling a National Commodity Board to rein in the escalating food inflation in Nigeria. A recent TechCabal report has outlined reasons why it won’t work.

“Inflation outturns over the past two years have risen even beyond this average historical rate and persisted for much longer than initially expected,” read a statement from the NBE.

According to data from the NBE, Ethiopia recorded consecutive months of inflation below 30%. In December 2023, the annual inflation rate increased to 28.7% from 28.3% in November 2023. Food prices, which comprise over half (53.5%) of the consumer price index (CPI) grew to 30.6% compared to the same period in 2022, and slightly higher than the 30% recorded in November 2023. The jump was linked to the nation’s internal conflict, the Tigray war.  

An overlap in malnutrition, disease, and food insecurity has worsened the situation. About 4 million people have also been affected by the ongoing drought. “Some supply-side and cost-push factors found to be statistically significant in contributing to inflation have included the internal conflict that disrupted local food transport/distribution networks and the large jump in key global commodity prices,” said the NBE. 

Other items besides food increased to 26.1% in December 2023 from 26.0% in the prior month, influenced by a weaker currency, the Ethiopian birr. Nonetheless, the NBE wants to reduce inflation to under 20% by June 2024 and under 10% by June 2025. They plan to do this by managing how much money is lent and cutting back on giving money directly to the government.

Performance of the Ethiopian birr

In December 2023, the birr lost value by 4.8%, ending the year at 56.1 birr for $1 from 53.6 birr recorded in December 2022, per a statement shared by Safaricom Ethiopia. The government made some changes in September 2022 to bring more foreign currency into the country. For instance, the NBE halted foreign currency use for purchasing in the country. Ethiopians can only keep foreign currencies for 30 days, instead of 90 when they return to the country from foreign trips. At the same time, the NBE made it easier for people to bring foreign currency into the country.

Ethiopians can bring up to $4,000 without declaring the cash at customs. However, the amount of money non-citizens can bring in without alerting customs officials has more than tripled from $3,000 to $10,000.