Naira to Weaken Further on Dollar Demand

The naira will weaken further on the back of rising dollar demand in the coming week, it has been learnt.

Other African currencies including the Kenyan’s shilling and Zambia’s kwacha are also seen weaker due to rising dollar demand from importers settling end of month payments, Reuters reports.

Foreign exchange dealers said the naira would fall further in the week ahead unless a major step was taken to inject liquidity.

The Central Bank of Nigeria had on Tuesday rejected calls to relax its forex rules, prompting the naira to weaken further to 306 against the greenback at the parallel market on Thursday.

The naira remains stable on the official interbank market around the 197 a dollar peg rate.

“The market was disappointed by the outcome of the MPC meeting. Coupled with the scarcity of dollars in the market, the naira is heading towards another sharp fall in the coming days,” the President, Association of Bureau de Change Operators, Aminu Gwadabe, said.

The CBN pegged the official exchange rate at 197 to the dollar in February last year and halted dollar sales to the BDC operators a few weeks ago.

The Ugandan shilling is forecast to trade with a marginal appreciation as commercial banks look to cover short positions.

“I am expecting some activity in terms of short position covering by banks … that could yield a bit of pressure on the shilling,” a trader at a leading commercial bank said.

The Tanzanian shilling is expected to hold steady next week and could gain ground marginally against the dollar.

“There are some inflows mainly from mining companies and the tourism sector. The outlook is that of stability for the local currency or a slight appreciation,” a trader at the CRDB Bank, Moses Kawiche, said.

Ghana’s cedi is expected to hold steady against the dollar next week after the central bank kept its benchmark lending rate unchanged this week, according to analysts.

After weakening nearly four per cent in the first three weeks of January on seasonal dollar demand from local importers and speculative buyers, the cedi has been fairly stable this week.

“Some level of stability is expected within the week ahead owing to slowing appetite for the greenback and reviving confidence in the cedi as a store of value, especially after the MPC held the policy rate unchanged,” an analyst at Dortis Research, Joseph Amponsah, said.

Oyetunji Abioye with agency report