Naira Set To Rise Further This Week


The naira will rise further against the dollar on the parallel market this
week, analysts and foreign exchange dealers have predicted.

They argued that the peaceful outcome of the presidential election and
the hard stance of the President-elect, Muhammadu Buhari, against
corruption and economic leakages had boosted investor confidence in the
economy.

The naira, which fell to a record high of 228 against the greenback before
the election, rose to 210 on Friday.

However, the local currency traded within the 199-199.50 band on the
official interbank market, where it has been stuck since February, after
the Central Bank of Nigeria pegged the rate.

The Acting President, Association of Bureau de Change Operators of
Nigeria, Alhaji Aminu Gwadabe, told our correspondent he expected the
local currency to rise further this week and beyond.

Gwadabe, who said the naira had firmed to 204 against the dollar on
Thursday, believe the trend would continue this week, adding that “the
naira may appreciate to something below 197 currently at the interbank
market.”

Foreign exchange dealers said the demand for dollar had reduced
compared to what happened before the presidential election.

A currency analyst at Ecobank Nigeria, Mr. Kunle Ezun, had said the
market was trading around the general elections and Buhari’s person.

He had said, “The market has been trading around sentiments and
emotions, this is why the naira is appreciating; nothing has really
changed in the fundamentals. There was high demand for the dollar
before the election because some people predicted post-election
violence. Now, the game is over and there is no violence. So, the demand
for the greenback is abating.

“The market is also trading around the sentiment that Buhari will fight
corruption, strengthen institutions and eliminate wastages. But after his
inauguration, the market will trade around the fundamentals like the oil
price, external reserves and others.”

In a sign of relief,
individuals who had stockpiled dollars to hedge
against political risk fearing the election could be marred by violence,
were exchanging their funds for the naira, Reuters reported.

“We are not going to see much of movement in the pricing of the naira at
the interbank market until the central bank reviews the present measure
which has stagnated the rate,” a dealer said.

The naira-dollar exchange rate has yet to witness any change at the
interbank market.

According to Reuters, the Kenyan shilling is expected to weaken, hurt by
negative sentiment after a deadly attack by al Shaabab near the frontier
with Somalia threatened its tourism fortunes.

The shilling has lost ground steadily since last year, partly due to a
downturn in tourism following attacks by al Shabaab militants.

Tourists
are a leading source of hard currencies for East Africa’s biggest
economy.

The shilling could trade between 92.50-93.20 to the dollar, with a move
beyond 93 likely triggering intervention from the central bank, National
Bank of Kenya trader, Chris Muiga, said.

Traders said a government bond could lend support to the shilling.

Kenya’s central bank has invited bids for a 12-year infrastructure bond
worth 25 billion shillings ($270m).

Ghana’s cedi could be buoyed by demand from businesses looking to
settle domestic quarterly bills.

The West African currency has weakened by about 11 per cent since
January, but looks set to reverse some of those losses, partly helped by a
$940m International Monetary Fund aid deal this month that is expected
to unlock additional offshore inflows.

“Liquidity has been weak on the local market … and this is likely to hold
the dollar/cedi at current levels next week,” Barclays Bank analyst,
Michael Akpakli, said.

The outlook points to a firmer Zambian kwacha this week, after the
central bank hiked the amount of money commercial banks should
deposit with the regulator and as the government plans to resolve a
mining tax row with foreign investors.

The Bank of Zambia will raise the statutory reserve ratio to 18 per cent
from 14 per cent on Wednesday.

“The increase will reduce liquidity and that should render support to the
kwacha,” analyst Maambo Hamaundu told Reuters.

President Edgar Lungu last month directed the finance and mining
ministers to adjust royalties on mining firms by April 8, saying the
copper-producer could consider temporarily reverting to the less punitive
tax regime which was in place in 2014.

Traders predicted a stable shilling on tightening liquidity but some
investors were concerned about the impact of a planned increase in
government spending.

The Ugandan government is planning to increase spending before the
2016 elections, although the central Bank of Uganda has vowed to use its
key interest rate to keep inflation in check.

The shilling traded at 3,000/3,016, weaker than 2,975/2,985 a week ago.

“Liquidity is getting tighter in the market, we see this tightening slowing
any weakening of the unit (shilling),” a trader at Bank of Africa, Ahmed
Kalule, he said.

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