African Currencies Recovery Reverses Sharply in September

AFRICAN STOCKS AND FINANCEOctober 7, 2026 at 10:58 AM UTC

TLDR

Africa's currency recovery reversed in September, with 12 of 17 major currencies weakening against the US dollar.
Rising oil prices and a stronger US dollar, fueled by Federal Reserve rate hikes, drove the widespread depreciation.
Uganda, Morocco, Ghana, and Zambia experienced the sharpest declines, posing new challenges for inflation and economic stability.

Africa's currency recovery reversed sharply in September, with 12 of 17 major currencies tracked weakening against the US dollar. This marks a significant shift from August, when 13 currencies appreciated, according to data compiled by real-time trading platform African Markets. The reversal was driven by a stronger dollar and rising global oil prices, renewing pressure on foreign exchange markets across the continent.

The external environment shifted markedly in September, with Brent crude prices rising 9 percent from $94.65 to $103.50 per barrel. This increase, fueled by US-Iran conflict concerns, raised import costs for Africa's oil-importing economies, boosting dollar demand and pressuring local currencies. Additionally, the US Federal Reserve's rate increase further strengthened the dollar and tightened global financial conditions, adding strain to emerging and frontier-market currencies.

Uganda's shilling recorded the sharpest decline in September, falling 4.51 percent from 3,718.79 to 3,894.59 per dollar. Morocco's dirham followed with a 3.81 percent decline, despite strong tourism receipts and substantial foreign exchange reserves. Ghana's cedi weakened 3.75 percent, reversing part of its 3.72 percent gain from August, while Zambia's kwacha fell 3 percent due to increased oil import costs.

This currency reversal poses a new challenge for African policymakers, occurring alongside a broadening disinflation trend. Higher crude prices threaten to reverse recent gains in inflation by increasing transport, energy, and food costs. The World Bank warned that inflation risks remain tilted to the upside, particularly for countries with weak currencies, limited reserve buffers, and high import dependence.

The September deterioration follows a relatively strong performance by African currencies in 2025, when 28 currencies appreciated against the dollar amid a weaker US dollar. However, some, like the Nigerian naira and Egyptian pound, continued to weaken even then. The World Bank's Africa Economic Update noted broad-based pressure on currencies in the second quarter of 2026 due to Middle East conflict escalation, though much of that eased by August.

Key Takeaways

The sharp reversal in African currency performance during September highlights the continent's ongoing vulnerability to global economic shifts, despite periods of resilience. While 2025 saw 28 African currencies appreciate against a weaker US dollar, and August 2026 recorded broad-based gains, the September downturn underscores how quickly external pressures can erode progress. The World Bank's Africa Economic Update previously noted significant currency depreciations in the second quarter of 2026 for several nations, including Ghana and South Africa, due to escalating Middle East conflict, though much of that pressure had eased by August. This fluctuating performance reveals a complex interplay between global shocks and domestic vulnerabilities. Countries with limited foreign exchange reserves and high external financing needs, particularly net energy importers, face amplified pressure from rising oil prices and a strengthening dollar. Conversely, commodity exporters are often better positioned to absorb such shocks. For instance, Ghana's cedi appreciated 13 percent in 2025, supported by gold and cocoa inflows, yet its September weakening illustrates the fragility when foreign exchange supply is disrupted, such as by issues with gold shipments. This dynamic environment necessitates robust policy responses to manage inflation risks and protect economic stability amidst volatile global markets.

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