A research signal from Citi is putting investors and policymakers on alert: currency devaluations could return to parts of Africa in 2026. The warning, shared by the bank’s analysts, points to a possible new cycle of pressure on exchange rates as governments confront maturing debts, stubborn inflation, and fragile foreign-exchange buffers.
The call matters for households, firms, and global funds. A weaker currency can raise import costs, push up inflation, and complicate debt service. It can also test political resolve at a sensitive time for several countries.
Why 2026 is coming into focus
Analysts have been tracking a cluster of sovereign bond maturities and refinancing needs due in the middle of the decade. Several African governments tapped international markets during the 2017–2021 period. Many of those bonds roll over between 2025 and 2027, a window that could stress funding plans if global rates stay high or investor risk appetite fades.
Foreign-exchange reserves in some economies remain thin after the shocks of the pandemic, commodity price swings, and tighter global liquidity. Where central banks lack room to defend currencies, pressure often shows up first in parallel market pricing, then in official adjustments.
“Risk of currency devaluations could return to Africa in 2026.”
Recent history sets the stage
Africa has weathered sharp moves before. Nigeria realigned its currency framework in 2023 and again in 2024 to close gaps with the parallel market. Egypt devalued several times since 2022 as it pursued reforms and external support. Ghana’s cedi slid during its debt restructuring before stabilizing under an IMF program. Zambia defaulted in 2020 and later reworked its debt, with knock-on effects on the kwacha.
These episodes showed how low reserves, high inflation, and hard-currency debt can interact. They also showed that reform, external funding, and clearer exchange-rate rules can help restore confidence.
What Citi’s warning implies
Citi’s call points to macro risks that could reappear as the cycle turns. Countries with large foreign-currency debts, narrow reserves, or wide current-account gaps could face choices on exchange-rate policy if financing stays tight.
- Debt rollover: Maturities in the mid-2020s may require market access at higher yields or official support.
- Inflation: A weaker currency can lift food and fuel costs, straining real incomes.
- Policy trade-offs: Defending the currency can drain reserves; adjusting the rate can reset prices.
Investors will watch the usual gauges: reserves, parallel market spreads, inflation trends, and debt-service calendars. Clear communication from finance ministries and central banks can ease volatility around any policy shift.
Counterpoints and signs of resilience
The outlook is not uniform. Several countries have tightened monetary policy, increased local-currency financing, or secured multilateral programs. Higher prices for some exports, such as oil and key minerals, have improved terms of trade for a few producers.
Flexible exchange-rate regimes, where they are credible, can act as a release valve and reduce the need for one-off devaluations. Gradual moves, paired with targeted social support, can soften the blow to households.
What to watch through 2026
Markets will focus on a handful of markers as the mid-decade window approaches:
- Foreign-exchange reserves trends and import cover.
- Size and timing of Eurobond and commercial debt maturities.
- IMF engagement and program reviews.
- Inflation momentum and food-price shocks.
- Policy transparency on FX auctions and rate management.
For governments, early refinancing, deepening local markets, and clear FX rules can reduce the chance of disruptive moves. For investors and businesses, hedging and shorter settlement cycles can limit currency risk during periods of stress.
Citi’s caution is not a forecast for every market, but a reminder of how fast pressures can build when financing tightens. The next 18 to 24 months will show whether reforms and reserve rebuilding can hold. If they do, any adjustments may be manageable. If they don’t, 2026 could bring another round of hard choices on exchange rates, with direct effects on prices, growth, and public finances across the region.
