The naira will most likely be rangebound in the next few trading sessions after the central bank devalued the currency this week, with dollar flows from oil companies taking some pressure off the unit.
Elsewhere in Africa, traders expect demand for dollars to ebb in Kenya and Ghana, but the currencies of Uganda and Tanzania could weaken amid rising importer demand.
NIGERIA
The naira closed at 174.30 to the dollar on Thursday, up slightly from 176.25 last week and two days after the central bank devalued the currency by 8 percent.
The bank also raised interest rates sharply as it sought to stem dwindling foreign reserves resulting from efforts to defend the currency against weaker oil prices.
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Africa’s leading energy producer is contending with a 30 percent fall in world oil prices since June and has spent billions of dollars of its reserves trying to defend the naira at what markets perceived to be an unrealistic level.
“We expect some oil companies to sell dollars next week and with (additional) dollar sales by the central bank to support the naira, the local currency is seen trading within a band,” one dealer said.
KENYA
The shilling was trading at 90.15/25 at 1220 GMT, barely moved from last Thursday’s close of 90.05/15, with traders seeing it hemmed within a 89.90-90.40 range.
“The possibility of the central bank intervening and inflows from the Kenyan diaspora should check the shilling’s depreciation,” said a currency trader, referring to money sent back by nationals living abroad to their families.
Demand for dollars is also expected to slow down as firms prepare to shut down for end-year holidays.
The shilling has weakened nearly 5 percent against the dollar this year, as tourist arrivals fell mainly due to frequent attacks blamed on Islamist militants.
UGANDA
The Ugandan shilling is likely to be on the back foot over the next week as dollar inflows fail to meet demand from the manufacturing sector.
At 1120 GMT commercial banks quoted the shilling at 2,772/2,782, compared with last Thursday’s close of 2,740/2,750.
“Inflows are very thin. There’s a bit of demand in the interbank and manufacturers are also showing appetite … I anticipate a weak shilling,” said Faisal Bukenya, head of market making at Barclays Bank.
The local currency has shed more than 9 percent against the dollar since the start of the year.
TANZANIA
Commercial banks in East Africa’s second-biggest economy quoted the shilling at 1,745/1,753 to the dollar on Thursday, weaker than 1,730/1,740 a week ago, with scope for further losses down the line.
“We are seeing some month-end inflows, but not sufficient to cater for the demand that is there,” said Sameer Remtulla, a dealer at Commercial Bank of Africa Tanzania.
“There is huge demand from oil companies, traders and manufacturers while the central bank has been off market.”
GHANA
Market watchers said Ghana’s cedi should hold its own as the West African country looked to secure a three-year IMF financial programme in the first quarter of 2015 to help stabilise its economy.
The local unit slumped nearly 40 percent in the first half of the year, but has recouped some of the losses, helped by a Eurobond issue and cocoa loan inflows.
The cedi traded at 3.2040 to the dollar at 1258 GMT on Thursday after closing at 3.2020 previously. It hit a record low of 3.8900 in July.
Reuters
