Naira May Extend Gains, Ghana Cedi to Weaken, Traders Say

Nigeria's naira and Kenya's shilling are set to firm in the coming week, while Ghana's cedi and Uganda's shilling could weaken, traders said on Thursday. Zambia's kwacha is expected to stay broadly steady.

The naira was quoted at 1,344 to the U.S. dollar on the official market on Thursday, compared with 1,345 a week earlier. On the street, it changed hands at 1,410.

Naira and Kenya Shilling

“The naira appreciated this week. We may see further appreciation next week if these conditions continue,” one trader said. Another trader added: “I expect the market to be well supplied as long as interest rates remain high and (the) central bank continues to sell treasuries.”

Kenya's shilling is expected to strengthen slightly against the dollar, driven by diaspora inflows and well-matched supply and demand. Commercial banks quoted the shilling at 129.40/50 to the U.S. currency, compared with last Thursday's close of 129.30/50. “The shilling is … going to strengthen in the coming week as we go into the new month if the demand eases off,” one trader said.

Ghana Cedi and Uganda Shilling

Ghana's cedi is seen trading with a weakening bias, pressured by a strong buildup in unmet corporate demand for foreign currency on the interbank market. LSEG data showed the cedi trading at 11.15 to the dollar, compared to 11.05 a week earlier.

“The dollar is likely to gain in the coming week as FX demand driven by the energy sector and coupon and dividend repatriation outstrips supply from the extractives sector,” said Andrews Akoto, head of trading at Absa Bank Ghana. “The rising value of bids submitted at the last two central bank FX auctions points to a growing backlog of unmet demand,” he added. Ronald Mensah, a trader at Stanbic Bank Ghana, said he expected oversubscription in the BoG FX auction consistent with prevailing market dynamics as dollar demand continues to outpace supply.

Uganda's shilling is seen weakening due to demand from energy importers and commercial banks. At 0832 GMT, commercial banks quoted the shilling at 3,740/3,750, compared to last Thursday's close of 3,715/3,725. An independent FX trader in Kampala said they were receiving elevated demand for hard currency from fuel importers, while some banks were also exerting demand to beef up their positions. “That demand wave will continue to be the main dynamic in the short term,” he said.

Zambia Kwacha Steady

Zambia's kwacha is likely to hold steady amid political tensions ahead of President Hakainde Hichilema's swearing-in on Tuesday for a second term following a disputed re-election. On Thursday, commercial banks quoted the currency of Africa's second-largest copper producer at 19.18 per dollar, compared with 18.98 a week earlier. “Expect consolidation rather than renewed kwacha appreciation,” Access Bank said in a note.

For the naira, the immediate outlook hinges on continued central bank treasury sales and high interest rates, according to traders. If those conditions hold, the official and street rates could keep converging.