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, said.

One Reply to “Naira Set To Rise Further This Week”

  1. The Naira Note.I am not a good student of Econs but I think the anenuncnmeot by the CBN is a welcome move in reforming the weak and worthless naira. What’s the purchasing power of Naira? Nigeria is one of the few countries in the world whose highest denomination bank note cannot buy a loaf of bread.-Maybe am blowing it out of proportion? Prices of essential commodities have shot up cos of the HYPERINFLATION in the country. Ordinary citizen now only have money for the very basics. A lot of things have become so ridiculous in Nigeria that they would be hilariously funny if they were not so deadly serious and causing so many of us to die unnaturally early. The word Billion and “trillion” has been added to our basic vocabulary, because that is the monetary figures government departments,corrupt imbeciles politicians, shady businessmen alike are now working with. The proposed dropping of two decimal places of Nigeria’s currency will better manage inflation, cut back on production costs and promote the use of small-denomination coins.Millions of Nigerians currently carry bundles of often-filthy naira bills to purchase goods, with the highest note worth 1,000 naira and coins rarely used. The country’s overall economy has shrunk and the standard of living of its 140 million people declined steadily since independence, to the extent that the World Bank now ranks Nigeria as one of the world’s twenty poorest countries. Today, in a country that pumps roughly 2 .5million barrels of oil a day and has the distinction of being the world’s seventh-largest oil producer, 60 percent of the people live on less than $1 a day. And that percentage rises to 70 percent in the Niger Delta region where the oil is being stolen from ..sorry commandeering from. . Even gasoline, which should be cheap and plentiful, is instead almost entirely imported from abroad at great cost, thanks to the near-total collapse of Nigeria’s refineries.If the CBN doesn’t change the current denomination of naira I see the current level of inflation in Nigeria would rival that of Argentina or Brazil in the 1980s.I think it is high time for the CBN to stabilize the exchange rate, reduce inflation, reform microfinance, restructure the lower denominations of our currency and re-introduce coins, as well as promote the efficiency of the payments system to ensure economic prosperity of Nigeria, and for Nigeria to become the Africa’s financial hub. Milk tastes good with Ovaltine/Bounrvita. We would prefer the old days when we had milk we could afford.

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