Naira collapse
July 20, 2023
Kenya’s shilling, Nigeria’s naira and Zambia’s kwacha are expected to weaken further in the week to next Thursday, while Ghana’s cedi and Uganda’s shilling could strengthen, traders said.
KENYA
Kenya’s shilling is expected to weaken further in the coming week, driven by demand for dollars from the manufacturing and energy sectors.
Commercial banks quoted the shilling at 141.70/90 per dollar, a record low, according to Refinitiv data, and compared with last Thursday’s closing rate of 141.30/50.
“It just continues to weaken. We have (demand) from oil (retailing companies) and manufacturing,” a trader at one commercial bank said.
NIGERIA
Nigeria’s naira will likely weaken slightly in the coming week as liquidity shortage in the official window persists even after the central bank removed restrictions on the exchange rate market, traders said.
The naira hit a low of 831 against the dollar on the official market on Tuesday, edging closer to the 840 reported by the FMDQ Exchange late last month. It is currently weaker on the black market at 860 naira.
“A lot of participants in the official window have not been able to fill their orders, and are turning to the black market,” one trader said.
ZAMBIA
Zambia’s kwacha is likely to continue trading weaker against the dollar next week as hard currency remains scarce amidst high demand from energy sector importers.
On Thursday, commercial banks quoted the currency of Africa’s second-largest copper producer at 19.4600 per dollar, down from 18.7000 a week ago.
“The local currency is expected to decline in value in the short run,” Access Bank said in a note.
GHANA
Ghana’s cedi is expected to strengthen against the dollar next week due to muted corporate demand for forex and remittance inflows, traders said.
Refinitiv Eikon data showed the cedi trading at 11.5000 to the dollar on Thursday, compared to 11.0000 at last Thursday’s close.
“The cedi has been on the front foot in recent sessions, mainly on the back of improved remittance flows on the market,” said Sedem Dornoo, a senior trader at Absa Bank Ghana.
“We expect the local unit to continue to strengthen in the coming sessions, especially given current lacklustre FX demand,” he added.
Other traders also said low demand for dollars would likely keep the currency steady or boost it over the coming week.
Commercial banks quoted the shilling at 3,640/3,650, compared with last Thursday’s closing rate of 3,665/3,675.
“Some (dollar) inflows from charities are expected as we head into the last week of the month,” said one independent foreign exchange trader in the capital Kampala.
NGOs that receive donations in hard currency convert some of it to pay salaries and other operational expenses at the end of each month.
REUTERS
