Kenya’s shilling has been on a downward spiral for the past two years, losing nearly 25% of its value against the US dollar. This has caused inflation, higher import costs, and increased debt servicing for the government. However, some investors have found a silver lining in the currency crisis, as they have benefited from higher returns on foreign currency assets.
According to a report by Business Insider Africa, investors who diversified their portfolios to include dollar-denominated or regional currency-linked investments have seen significant gains, as the depreciation of the shilling has increased the value of their foreign currency holdings. For instance, the interest rate on dollar money market funds from companies like Sanlam and CIC Asset Management has risen from 3.5% to 6% since the beginning of the year.
Similarly, investors who own shares of cross-listed companies on the Nairobi Securities Exchange (NSE) or regional stock markets have enjoyed higher dividend payouts, as the currencies of neighbouring countries such as Uganda, Tanzania, and Rwanda have appreciated against the shilling. The report cites examples of companies such as Umeme Limited, Bank of Kigali, and MTN Uganda, whose dividends have increased in value for Kenyan investors due to the exchange rate movements.
Moreover, Kenyan multinational corporations with operations in different countries have also benefited from the currency crisis, as their overseas profits and assets have increased in value when converted to shillings. The report mentions financial institutions such as DTB Group, I&M Holdings, NCBA Group, and Equity Group as some of the beneficiaries of this trend.
The currency crisis in Kenya has been attributed to various factors, such as high global oil prices, increased dollar demand by importers, a widening current account deficit, and rising US interest rates. The Central Bank of Kenya (CBK) has adopted a mix of policies to manage the situation, such as allowing greater exchange rate flexibility, pursuing fiscal consolidation, and tightening monetary policy.
The outlook for the shilling remains uncertain, as external and domestic risks persist. However, some analysts expect the currency to stabilise in the medium term, as the economy recovers from the multiple shocks it faced in the past two years. The CBK projects the economy to grow by 5% in 2023, supported by robust private investment, improved business confidence, and increased public spending.
The currency crisis in Kenya has been a challenge for many, but an opportunity for some. Investors who diversified their portfolios have been able to hedge against the risks and reap the rewards of the currency movements. As the economy rebounds, they may continue to enjoy the benefits of their prudent investment decisions.
Source: Business Insider Africa
