Naira to Extend Gain Against Dollar

500 and 1000 naira bills (Nigerian currency)500 and 1000 naira bills (Nigerian currency)
  • Naira to Extend Gain Against Dollar

The naira is expected to extend further its gain against the United States dollar owing to weak demand and increased supply of the greenback.

The local unit, which closed at 370/dollar on Monday, closed at 365/dollar on Thursday.

According to analysts and foreign exchange traders, the naira is expected to be range bound against the US currency next week as weak demand coupled with increased dollar supply from the central bank and other sources provide support for the local currency.

The naira was quoted at 365 on the black market on Thursday.

It traded at around 360 to the dollar for investors but was stuck at 305.85 on the official market, Reuters reported on Thursday.

“We expect some stability due to weak demand and increased supply of dollars, coupled with the Muslim holiday,” the President, Association of Bureau De Change Operators of Nigeria, Aminu Gwadabe, told Reuters.

The nation’s financial market will reopen next Tuesday after the two-day Muslim holiday.

According to Reuters, the Tanzanian shilling is expected to hold steady in the coming days, but could weaken slightly if there is a spike in demand for the US dollars from energy and construction sectors.

“There is pressure on the shilling from oil and infrastructure companies. If the demand for dollars increases, the shilling could marginally weaken next week although 2,250 is seen as the resistance level,” said a trader at CRDB Bank.

Kenya’s shilling is next week expected to take its cue from a court ruling on a petition challenging the re-election of President Uhuru Kenyatta, while the Ugandan shilling is likely to weaken on increased demand for hard currency.

The Kenyan shilling would get price direction from Friday’s Supreme Court ruling on a petition brought by opposition leader Raila Odinga challenging the re-election of Kenyatta, traders said.

The shilling firmed to a two-month high against the dollar after Kenyatta won with a margin of 1.4 million votes. The court will either uphold the outcome or overturn it. If it chooses to overturn the result, another vote must be held in 60 days.

The Ugandan shilling was expected to trade in a weakening tone with demand for hard currency seen picking up as the year’s fourth quarter nears.

“As we approach the last quarter, we anticipate demand to start picking up and that will probably see the unit (shilling) move lower (weaker),” said Faisal Bukenya, head of treasury at Exim Bank in the capital Kampala.

The kwacha is likely to remain range-bound in the coming week due to matching demand and supply of hard currency.

“It is likely to trade flat next week because demand and supply seem to have reached an equilibrium,” independent financial analyst Maambo Hamaundu said, referring to the kwacha.

Ghana’s cedi is considered stable on news of a successful review and extension of the country’s $918m aid programme with the International Monetary Fund.

The local unit which has been fairly stable this year, recorded a marginal loss in the past week on unmet corporate dollar demand, despite regular central bank support.

The International Monetary Fund on Wednesday granted an extension to Ghana’s three-year deal for an extra year beyond its original April 2018 end date and approved the next tranche of balance of payment support of $94.2m to the country.

About the Author

Samed Olukoya
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya

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