The Nigerian naira
is seen firming in the next week to Wednesday if the country’s
elections are credible and peaceful, while Kenya’s shilling could
weaken due to dollar demand from the oil sector, traders said.
NIGERIA
Nigeria’s naira
could start appreciating if Saturday’s presidential elections are
credible and violence-free, with foreign investors likely to view a
victory by incumbent President Goodluck Jonathan as a sign of stability.
Dollar demand has
been persistently high in the run-up to the elections in Africa’s most
populous nation, as businesses and wealthy Nigerians take long dollar
positions to hedge against the risk of instability around the polls.
Parliamentary polls
last Saturday, though marred by localised violence and isolated
allegations of fraud, were generally deemed to have been among the most
credible in decades. A similar outcome on Saturday would boost
confidence.
“There is a
significant disconnect between risk sentiment onshore and offshore.
Locals shifted to the dollar and will go long naira again,” said Samir
Gadio, emerging markets strategist at Standard Bank.
“It is likely the naira will appreciate in the coming weeks,” he told Reuters.
The naira was trading at 155.05 to the dollar early on Thursday, stronger than the 155.20 naira at Wednesday’s close.
The Central Bank
sold $300 million at 152.58 a dollar at its bi-weekly foreign exchange
auction on Wednesday, below demand of $444 million.
More is at stake in
the presidential election than the parliamentary polls, and while the
indications so far point to a relatively calm vote, violence or
prolonged legal challenges to the outcome could spook the market,
traders said.
“It is not
predictable how the naira will trade next week. It depends on the
outcome of Saturday’s election,” one currency dealer in the commercial
capital, Lagos, said.
GHANA
Ghana’s cedi will
likely trade stable against the greenback in the coming week, with
lower levels of corporate demand and the Central Bank seen eager to
prop up the market.
The local unit has
some upside potential if foreign investors sell dollars to acquire
equities and bonds on the secondary market in a pattern seen throughout
April.
Jacob Brobbey
quoted the cedi at 1.5115/40 at midday on Thursday. He anticipates that
it will trade in the range 1.5100-85 next week.
“Demand is low and
the Central Bank is seen as supporting the market, so any renewed
selling for offshore might see it gain again,” Mr. Brobbey said.
Sampson Akligoh
from Databank said the average interbank cedi-dollar rate was fairly
stable last week, with some intra-day gains in the last two days.
“With most
investors taking positions for a potential three-year note issue,
depreciation pressures may be subdued next week,” he said in an email.
However, Biggles Amponsah from Access Bank said corporate dollar demand could be edging up.
“Commerce and
cement production are expected to lead the demand for the dollar. The
intra-day fluctuations witnessed this week have been highly aided by
speculative trading,” he said via email.
KENYA
The Kenyan shilling
is seen gaining ground due to tight market liquidity, as traders look
to sell long foreign currency positions and keenly watch the country’s
Central Bank, but dollar demand from oil companies could dampen that.
At 1100 GMT, commercial banks quoted the shilling at 84.10/20 to the dollar, compared with last Thursday’s close of 84.40/50.
Traders said there
was increased overnight lending at high interest rates that are
expected to drag into next week. Central Bank of Kenya CBK04 injected
5.7 billion shillings on April 6 at a weighted average of 2.976 percent.
“The high overnight
lending is a disincentive to hold long dollar positions. Interbank
players are likely to sell these positions in preference for the
shillings,” said Mwambu Malamba, a trader at Commercial Bank of Africa.
But high oil prices
are expected to put pressure on the shilling, with East Africa’s
largest economy looking to adjust fuel prices upwards, traders said.
“We expect the
shilling to weaken on high oil prices. We have seen good demand from
the oil sector,” said Sameer Lagadia, head of trading at Diamond Trust
Bank.
Inflows from the tea sector are expected to give the local currency some reprieve, said Mr. Lagadia.
UGANDA
The Ugandan shilling is seen slightly weaker against the dollar, due to demand from the oil sector.
Commercial banks
quoted the local currency at 2,350/2,360 against the dollar, compared
with last Thursday’s close of 2,345/2,350.
“We expect the
shilling to weaken a little bit as corporates come to buy and push it a
little bit – basically oil companies’ (dollar) demand,” said Peter
Mboowa, a trader at Kenya Commercial Bank, Uganda.
Traders expect the
shilling to trade in the 2,350-2,375 range in coming days; they say the
shilling had shrugged off capital gains tax payments by UK explorer,
Tullow Oil, to the Ugandan government after selling stakes in its
Ugandan properties to France’s Total and China’s CNOOC.
“The only outside
dollars have taken interest in T-bill and T-bond rates going up. That
is why offshore investors are coming in, but not much effect is
expected,” said Ali Abbas, a trader at Crane Bank, Uganda.
TANZANIA
The Tanzanian shilling is expected to come under more pressure from corporate demand in the coming week.
Commercial banks
quoted the local currency at 1,510/1,515 to the dollar compared with
1,502/1,507 at the close of last Thursday’s session.
“After remaining
stable for the past week, speculation kicked in. If we see serious
demand from telecoms and energy sectors, the shilling could further
weaken next week,” said CRDB Bank trader, Frank Ndugulile.
“There are no inflows coming in and the Central Bank is mildly supporting the shilling at the moment,” Mr. Ndugulile added.
Traders said they expect the shilling to trade in the 1,510-1,520 range in the coming week.
“The long-term
sentiment is that the shilling will likely weaken, although it could
appreciate slightly on a short-term basis,” said Neema Rwehumbiza, a
money markets trader at Barclays Bank, Tanzania.
Between last
Wednesday and Wednesday, the Central Bank of Tanzania traded $44.9
million on its Interbank Foreign Exchange Market, according to
statistics on its website.
