Why Africa’s Currencies Are Splitting Into Commodity Winners and Energy Losers

Over the past year, African currencies have diverged sharply. Zambia (copper exporter) and Uganda (with rising gold and coffee exports) have fared relatively well, while Ghana and Kenya – which import substantial energy – have seen their currencies weaken. Data (see charts below) show Zambia’s kwacha strengthened from roughly 24/$ in late 2025 to about 19/$ by mid-2026, buoyed by surging copper prices. Ghana’s cedi, by contrast, slid from 10.4/$ in mid-2025 to 11.6/$ by Aug 2026, pressured by heavy dollar demand in the energy sector. The Ugandan shilling moved modestly from 3,580/$ to 3,760/$ (late ’25 to mid ’26), facing two offsetting forces: higher oil costs (Uganda is a net energy importer) versus robust coffee/gold export inflows. Kenya’s shilling has remained relatively stable around KES 128–130/$, underpinned by steady remittance flows. These trends reflect commodity price effects and hard-currency flows (Table 1).

Table 1: Exchange-rate changes (local currency per USD; negative = local currency depreciation), FX reserves and key metrics (mid-2026 data) Chart: 12-month USD exchange rates for Uganda, Ghana, Zambia and Kenya (data in Table 1). Commodity-linked economies (Zambia) held up better, while oil importers (Ghana, Uganda) saw weakening. (Source: central bank and market data.)

Commodity and Energy Price Trends

The commodity backdrop explains much of this divergence. Copper prices have rallied strongly: LME copper rose over 40% YoY through summer 2026. This surge lifted Zambia’s export revenues; copper accounts for over two-thirds of its exports. Oil prices also spiked: Brent crude surged 44% YoY (averaging $87/bbl YTD 2026 vs. $60 in mid-2025), driven by Middle East supply risks. High oil costs hit net-importers like Ghana and Uganda, raising their dollar import bills. Other commodities – gold and cocoa – remain near peaks. Gold traded above $4,400/oz in mid-2026, benefiting Ghana and Uganda (major gold exporters). Cocoa prices have also been high, aiding Ghana’s cocoa revenues.

Mechanisms Linking Prices and Currencies

The link between commodity prices and currencies operates via terms of trade and hard-currency flows. When commodity prices rise, exporters earn more dollars: they convert earnings domestically, boosting FX supply. Zambia, for example, saw abundant FX from mining firms, strengthening the kwacha. By contrast, high oil prices inflate import costs for energy-poor countries. Ghana’s traders and manufacturers needed more dollars to import fuel and other energy-intensive inputs, increasing FX demand. Central banks partially shield currencies via FX auctions, but Ghana’s Bank of Ghana now spends reserves to meet bids, and unmet demand keeps the cedi under pressure

Other drivers include remittances and portfolio flows. Kenya and Uganda benefit from diaspora inflows: monthly remittances (often rising around holidays) provided steady dollar inflows, cushioning currency moves. Foreign direct investment (e.g. mining projects) has also helped Zambia. Conversely, fiscal and debt pressures can swell FX needs: Ghana’s external debt servicing and subsidy costs sustain dollar demand.

Policy Responses

Central banks and governments have responded actively.

Monetary Policy: Uganda’s central bank has tightened liquidity (raising reserve requirements) to curb shilling weakness. Ghana’s central bank consistently holds FX auctions to supply dollars, dipping into reserves. Zambia’s central bank relied on market-determined policy (casual auctions) and modest rate cuts in late 2025 to bolster growth amid higher copper revenue. Kenya’s central bank stayed on hold (policy rate 8.75%) but leaned on reserves and bonds to stabilize the shilling.

Capital & FX Controls: Broad capital controls are limited (unlike Nigeria’s strict rules). Ghana has tightened rules on crypto/diaspora flows to ensure official FX channels capture inflows. Some countries (e.g. Zambia) have restrictions on FX demand for domestic borrowing. But most rely on FX auctions and open market operations under a flexible rate.

Fiscal Measures: Commodity exporters often use windfalls for budget support. Ghana’s government is channeling gold export receipts into reserves. Zambia did not implement new fiscal stimulus, but improved mining royalty collections. Energy importers face fiscal strain: higher oil subsidies or fuel taxes raise budgets. Ghana’s IMF program (with $3B ECF) imposes tight fiscal discipline to reduce deficits. Kenya has trimmed fuel subsidies recently to ease FX outflows.

Market Implications and Outlook

The market outlook hinges on commodity trends and global conditions. If copper and gold remain strong (buoyant Chinese demand and safe-haven flows), Zambia and Ghana (via gold) could see continued currency support. However, if global growth falters or U.S. rates stay high, base-metals demand may slip. Similarly, a détente in Middle East conflict could ease oil to the mid-$80s, easing pressure on Ghana and Uganda’s import bills. Seasonal factors matter: end‑year remittances should bolster Uganda and Kenya, but US elections or further Iran tensions are risks.

Election uncertainty in Zambia (Aug 2026) could spur volatility (investors demand dollars pre-vote). Ghana’s cedi may stabilize if the IMF finishes its program (final $371m tranche was anticipated ). Kenya’s shilling will track fiscal and external balance: continued tourism/exports could keep it steady, barring large shocks.

Short-term Outlook: Given current data, currency divergence may persist: Zambia and Uganda relatively stronger (commodities cushioning), Ghana and Kenya weaker (high energy import bills). Any drop in oil prices would quickly ease pressure on Ghana/Uganda. Absent that, continued central bank intervention will be needed to prevent sharp devaluations.

Conclusions and Recommendations

Africa’s currency split reflects global commodity cycles: winners are those with robust commodity exports and capital inflows (e.g. copper and gold), while losers are net energy importers facing steep oil import bills. Policymakers should use windfalls to build buffers and diversify. Specifically:

• For commodity exporters: Invest some export windfall into reserves and debt reduction to prepare for commodity price reversals. Strengthen fiscal savings (e.g. sovereign wealth funds) to stabilize future budgets.
• For energy importers: Mitigate oil shock via alternative energy, fuel hedging, or regional power pooling. Remove or target fuel subsidies to align prices with costs (as higher global oil lifts import bills). Strengthen FX liquidity: maintain some flexible reserve cover despite pressures.
• Central banks: Maintain flexible exchange rates to absorb shocks, intervene only to smooth excessive volatility. Uganda’s approach (higher CRR) and Ghana’s auctions are prudent; over-reliance on reserves could be risky. Building foreign reserves remains key (directed by IMF advice).
• Diversify Economies: Accelerate diversification beyond traditional exports. Ghana can further develop services and industry; Uganda and Zambia can expand tourism and manufacturing. In all cases, continued structural reforms (improving tax collection, easing business regulations) will reduce external vulnerabilities (noted as IMF recommendations).

Chart Captions: The first chart plots each country’s FX rate (local currency per USD) over 12 months, illustrating divergence. The second dual‐axis chart overlays copper (red) and Brent oil (blue) prices with Zambia’s kwacha (orange, inverted scale) and Ghana’s cedi (green), highlighting that rising copper aligns with kwacha strength while rising oil aligns with cedi weakness.