Cost Squeeze Drags Kenya’s Private Sector into Third Month of Contraction
Kenya’s private sector activity shrank for a third consecutive month in May as a relentless surge in operating costs forced businesses to cut jobs and pass expenses to struggling consumers. The headline Stanbic Bank Kenya Purchasing Managers’ Index plummeted to a multi-month low, tracking well below the 50.0 neutral threshold that separates economic growth from contraction. A sharp combination of domestic fuel price hikes, increased transport levies, and lingering global supply disruptions drove total corporate input costs up at the fastest pace seen since late last year. Faced with eroding margins, companies aggressively raised their own output charges. This triggered severe customer resistance, causing new orders and domestic sales books to collapse at an accelerating rate. Compounding the downturn, firms trimmed their workforces for the first time in over a year. Businesses primarily axed temporary and casual contracts to rein in overheads amid the demand slump. The downturn hits as the government targets aggressive tax collection to manage public debt, a fiscal strategy that analysts warn could further depress consumer spending power through the second half of the year.
Nigeria: CBN Hikes Interest Rates to Raise N1.46 Trillion Amid Surging Demand
LAGOS – Nigeria’s central bank raised N1.457 trillion at its latest treasury bills auction, aggressively hiking yields across all tenors despite receiving overwhelming investor subscriptions that more than doubled its initial target. The Central Bank of Nigeria (CBN) capitalized on robust market liquidity, drawing N2.160 trillion in total bids against an initial N1.00 trillion offer size during Monday’s primary market auction. Result of the Auction published by CBN showed yields on the benchmark 364-day paper jumped 20 basis points to clear at 16.35%, reflecting aggressive central bank efforts to mop up banking system liquidity and defend the volatile naira. The 91-day and 182-day stop rates also increased, clearing at 16.05% and 16.19% respectively, as institutional investors successfully demanded higher premiums to lock in short-term capital. Investor demand was heavily skewed toward long-dated debt, with the one-year paper attracting N1.946 trillion in subscriptions, representing roughly 90% of total market interest during the session. The aggressive rate hikes signal a sharp reversal from May’s brief easing trend, re-aligning the CBN with a hawkish monetary stance to combat persistent domestic inflationary pressures. The central bank’s monetary policy committee previously raised its benchmark interest rate to a record 26.5% to curb persistent inflation and stabilize the macroeconomic environment
Fuel Shocks, Iran War Fears Drag South African Private Sector into May Contraction
South Africa’s private sector activity contracted in May as output and new orders plunged under the weight of surging fuel prices and escalating geopolitical uncertainty surrounding the Iran war, a business survey showed on Wednesday. The S&P Global South Africa Purchasing Managers’ Index (PMI) fell below the critical 50.0 no-change threshold, dropping from April’s expansionary reading to signal a sharp reversal in the country’s economic momentum. Firms reported that escalating global tensions disrupted supply chains and stoked inflation. Rising operating costs forced businesses to hike selling prices, directly depressing domestic demand and causing clients to pull back on new orders. “The May survey highlights how vulnerable domestic demand remains to external shocks,” said David Owen, Senior Economist at S&P Global Market Intelligence. “Higher fuel prices and geopolitical anxiety squeezed corporate margins and chilled consumer spending.” The downturn coincides with a tough macroeconomic environment. Statistics South Africa recently reported that consumer inflation accelerated to 4.0%, driven by a 35.4% jump in diesel prices that heavily impacted local logistics. The South African Reserve Bank (SARB) has kept its benchmark repo rate steady at 8.25% to combat these persistent price pressures, further constraining borrowing and capital investment across the private sector. The manufacturing and construction sectors bore the brunt of the May slowdown. Managers noted that defensive stockpiling of raw materials, triggered by shipping delays, tied up critical cash reserves. Economists warn that the contraction threatens broader economic growth. High unemployment, which currently stands at 32.7%, leaves little room for the domestic economy to absorb sustained global supply shocks and elevated energy costs.
Uganda’s Gold Exports Surge to $6.5 Billion in Nine Months
LAGOS – Uganda exported gold worth about $6.5 billion between July and March, cementing its position as the country’s top foreign exchange earner, the Bank of Uganda said. The sharp rise highlights the success of the country’s open capital account policy. It has attracted investors, spurred gold refining, and boosted inflows. Gold has surpassed coffee as Uganda’s leading export. Full-year 2025 exports reached $5.8 billion, up 75.8% from $3.3 billion in 2024, driven by record global prices. Deputy Governor Michael Atingi-Ego noted the growth during the May 2026 Monetary Policy Statement. “We have seen exports of gold rising sharply. Actually from July to March we see that we exported gold worth about six point five billion dollars,” he said. Uganda operates around nine refineries producing 99.9% pure gold. Much of the exported volume comes from imported raw material, mainly from regional neighbors, which is refined and re-exported. This model has generated forex inflows but limited net gains. Analysts estimate only about $200 million in value addition stays in the economy after imports. The Bank of Uganda is launching a domestic gold purchase program to increase local sourcing, improve traceability, and build reserves. It aims to buy up to 10 tonnes annually from Ugandan miners. The country inaugurated its first large-scale gold mine in 2025, a $250 million Chinese-owned project expected to boost domestic production. Economists say the open policy has created jobs in refining and trading. However, questions remain on tax collection, local benefits, and reducing reliance on imported gold.
Braking is Not an Option: Ogho Okiti Urges Nigeria to Accelerate Economic Reforms
LAGOS— Despite political pressure from the?upcoming 2027 Nigerian general election, Economist and CEO of ThinkBusiness Africa, Dr. Ogho Okiti, has cautioned against reversing the federal government’s current macroeconomic reforms, asserting that Nigeria’s path to sustained economic growth lies in deepening, not abandoning, the current trajectory. Discussing with WebTV Nigeria on the Q1 2026 GDP report, which showed a growth of 3.89%, the strongest first-quarter performance in a decade-Dr. Okiti emphasized that the economy has seen a “nearly double” rate of growth compared to 2023, and these results validate the profound structural reforms undertaken over the last three years by the Bola Tinubu led administration. Key to this growth, Okiti noted, are the administration’s most significant policy actions: the removal of fuel subsidies and the liberalization/unification of the exchange rate. He categorized these as the most consequential economic reforms in Nigeria’s history, directly responsible for the current upward momentum in the GDP trajectory. “This is not the time to reverse any reform. This is the time to do more reforms because there are still structural weaknesses,” Dr. Okiti stated during a recent interview. He identified four critical structural bottlenecks: unreliable power infrastructure, an excessively large informal sector, significant skills gaps, and systemic income inequality. These factors hinder the translation of macro gains into micro-level benefits. Dr. Okiti emphasized the need to decentralize economic decision-making. He criticized the reliance on a “one-man” governance style, suggesting that faster, local-level decision-making is essential to catalyze true socio-economic development. Looking toward 2027, the economist maintains a positive outlook. He believes recent policies have built resilience, pointing to the lack of fuel supply disruptions despite price spikes as a sign of progress.
Nigeria Economic Reforms Deliver Market Stability But Fail To Relieve Public, Report Finds
LAGOS – President Bola Tinubu’s first three years in office successfully averted a major macroeconomic meltdown through bold structural reforms, yet these policy victories have failed to yield meaningful welfare improvements for ordinary Nigerians. The Centre for the Promotion of Private Enterprise (CPPE) disclosed this in an economic assessment brief released Sunday. The report evaluated the administration’s performance between May 2023 and May 2026. According to CPPE, the administration’s aggressive monetary and fiscal interventions pulled the country back from the brink of total collapse, significantly boosting foreign investor confidence and stabilizing institutional markets. Data shows Nigeria’s external reserves climbed near the $50 billion mark, while the unification of foreign exchange windows helped stabilize the volatile Naira around N1,400 per dollar at the official window. Furthermore, domestic refining capacity improvements, largely led by the Dangote Refinery, drastically slashed foreign exchange demand for imported fuel, helping Nigeria maintain consecutive trade surpluses into the first half of 2026. National Bureau of Statistics data also shows real Gross Domestic Product grew by 3.89% year-on-year in the first quarter of 2026, up from 3.13% recorded in 2025. However, the think tank stressed that these positive macroeconomic indicators have not translated into prosperity for citizens, as severe inflation continues to decimate household incomes and consumer purchasing power. The CPPE revealed that the aggressive economic adjustment process bloated Nigeria’s public debt profile to a historic N159.3 trillion, heavily driven by currency depreciation and the securitization of Central Bank overdrafts. Additionally, critical production sectors remain severely constrained, with data showing a sharp 15.30% contraction in the electricity and gas sectors during the first quarter of 2026, crippling local manufacturing. “The administration faces the task of turning reform gains into job creation, increased incomes, reduced poverty levels, and improved quality of life for Nigerians,” stated CPPE Chief Executive Officer, Dr. Muda Yusuf. Yusuf added that persistent rural insecurity remains a massive structural bottleneck, crippling agricultural hubs, driving food scarcity, and keeping structural inflation painfully high for the vulnerable population. To bridge this severe welfare gap, the CPPE urged the federal government to urgently transition its policy focus away from mere economic stabilization toward inclusive, productivity-driven shared prosperity. The body recommended enforcing concessional tariffs on industrial inputs, tackling public sector fiscal leakages, and prioritizing the safety of farming communities to permanently bring down food costs.
African Airlines Buck Global Decline as April Seat Occupancy Rises to 77.9%
African airlines raised international seat occupancy to 77.9% in April 2026, gaining 0.7 percentage points from last year as regional passenger demand steadily outpaced capacity expansions. The International Air Transport Association data showed African passenger demand climbed 2.2% year-on-year. Regional capacity grew by 1.2%, proving the continent’s aviation sector remains highly resilient despite severe global headwinds. The positive performance occurred as global passenger demand fell 3.4% overall. Geopolitical tensions and intense fighting in the Middle East severely dragged down international flight traffic metrics across major travel corridors. Aviation markets remain unstable, with jet fuel prices more than doubling in April. This specific surge severely inflated baseline airline operating costs and triggered upward pressure on international ticket pricing. “The 46.6% fall in demand for carriers in the Middle East due to war was so acute that it dragged overall demand down,” said Willie Walsh, IATA Director General. Walsh noted that airlines are trimming forward schedules to balance skyrocketing fuel expenses with weakening consumer demand. Middle Eastern carriers saw demand plunge 48.1%, leaving their load factors at 70.1%. Conversely, European direct traffic to Asia surged 15.3% as travelers actively bypassed disrupted transit hubs in the Gulf. Other global regions posted mixed results. Latin American carriers led international growth at 8.9%, while Asia-Pacific airlines climbed 3.0%, achieving a record regional April load factor of 87.5%. Meanwhile, North American international demand flattened. Global domestic travel also stalled completely, with noticeable traffic declines across India and the United States canceling out marginal growth recorded in Japan and China.
Kenya Headline Inflation Hits 29-Month High of 6.7% as Fuel Shocks Bite
Kenya’s headline inflation accelerated sharply to 6.7% in May 2026 from 5.6% in April, driven by domestic fuel price hikes linked to the ongoing Middle East conflict, the statistics office reported Friday. The Kenya National Bureau of Statistics (KNBS) confirmed that consumer prices reached their highest level since January 2024, pushing inflation dangerously close to the government’s upper target ceiling of 7.5%. Aggressive price surges across key non-discretionary sectors fueled the spike. Transport costs led the momentum with a 16.5% jump, while food and non-alcoholic beverages increased by 9.4% over the 12-month period. Housing, water, electricity, gas, and other fuels also ticked up by 3.4%. Collectively, these three heavy-weight categories comprise over 57% of the total national consumer inflation basket. The rapid cost-of-living acceleration comes despite aggressive state interventions. The government previously cut petroleum VAT from 16% to 8% and deployed 6.2 billion shillings ($40 million) via the fuel stabilization fund. This persistent, supply-side inflationary pressure now leaves the Central Bank of Kenya (CBK) in a complex position ahead of its upcoming Monetary Policy Committee interest rate review scheduled for June 9. Monetary policymakers previously held the benchmark Central Bank Rate steady at 8.75% during their April meeting, but this two-month inflationary surge heavily tables the prospect of a hawkish policy turnaround.
Stronger Dollar, Oil Surge Pull Gold Prices to Two-Month Low Amid U.S.-Iran Clashes
LAGOS — Gold prices tumbled to a two-month low Thursday as fresh U.S. military strikes on Iran propelled the dollar higher and triggered a sharp surge in global crude oil prices. Spot gold fell 1.5% to $4,389 per ounce, its lowest level since late March, wiped out by a rallying U.S. dollar that made greenback-priced commodities more expensive for international buyers. The geopolitical escalation near the Strait of Hormuz simultaneously drove Brent crude futures up 3.6% toward $97 a barrel, stoking intense global fears of an energy-driven structural inflation spiral. These compounding supply-side inflation risks have heavily clouded the Federal Reserve’s interest rate outlook, forcing policymakers to signal potential rate hikes to curb rising energy costs. Because bullion yields no interest, the prospect of prolonged high interest rates dramatically increases the asset’s opportunity cost, prompting investors to liquidate gold positions for rising Treasury yields. The market reaction highlights a sharp reversal from early 2026 trends, where safe-haven demand amidst Middle East tensions initially pushed gold prices to historic, record-breaking highs. Silver prices also plummeted in tandem, dropping over 2.5% to $72.37 per ounce, reflecting a broader, systemic liquidation across precious metals as liquidity shifted rapidly into the dollar. Market participants are now closely watching upcoming U.S. inflation data to gauge whether the Federal Reserve will officially pivot toward tighter monetary policy following the oil shock.
Defying Easing Signals, Nigerian Bank Reserves Surge as Informal Cash Drops 2%
LAGOS – Cash held outside Nigeria’s banking system declined by N104.76 billion between February and April 2026, defying expectations following the Central Bank of Nigeria’s decision to cut interest rates at its first annual policy meeting in February. Latest data from the apex bank reveals that currency outside bank vaults dropped 2.02% from N5.19 trillion in February—when the Monetary Policy Rate was reduced to 26.5%—down to N5.08 trillion in April. The contraction indicates a surprise tightening of cash liquidity within the formal economy, moving away from informal channels despite a lower benchmark interest rate that traditionally encourages spending over saving. Concurrently, total currency in circulation fell by N63.46 billion to N5.65 trillion in April, meaning currency held outside banks now accounts for 90.03% of total cash, down from 94.33% in December 2025. The Central Bank did not publish money and credit statistics for March 2026, preventing a month-on-month comparison, but the two-month aggregate trend underscores a clear structural shift. Meanwhile, commercial bank reserves held at the central bank spiked 5.68% during the review period, expanding by N1.86 trillion to hit N34.60 trillion by April 2026. This liquidity shift aligns with broader macroeconomic realities, as recent data puts Nigeria’s headline inflation rate at 15.69% for April 2026, keeping real interest rates firmly positive. Market analysts note that aggressive open market operations by the apex bank alongside stricter digital transaction compliance frameworks have continuously forced informal capital back into the formal banking system. However, cash dominance persists long-term; currency outside banks is up 11.29% year-on-year from the N4.57 trillion recorded in April 2025, showing the informal sector’s enduring grip.
