LAGOS – Nigeria’s naira could firm against the dollar on the parallel market next week after a peaceful election but Kenya’s shilling could weaken after a deadly attack by Islamists which could further hit tourism.
The naira firmed to 210 to the dollar on the parallel market from 226 a week ago after opposition leader Muhammadu Buhari won in a vote that avoided the violence of previous polls.
However, the currency traded within the 199-199.50 band on the official interbank market, where it has been stuck since February, after the central bank pegged the rate.
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.
“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 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 say 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 ($270 million).
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 percent since January, but looks set to reverse some of those losses, partly helped by a $940 million IMF 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.
He said demand for the local currency would rise ahead of public holidays on Friday and Monday.
The outlook points to a firmer Zambian kwacha next 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 percent from 14 percent next Wednesday.
“The increase will reduce liquidity and that should render support to the kwacha,” analyst Maambo Hamaundu said.
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 plans 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.
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“Liquidity is getting tighter in the market, we see this tightening slowing any weakening of the unit (shilling),” said Ahmed Kalule, trader at Bank of Africa.
($1 = 92.6500 Kenyan shillings) (Reporting by Oludare Mayowa, Elias Biryabarema, Kwasi Kpodo and Chris Mfula; Compiled by Stella Mapenzauswa; Editing by James Macharia)(Reuters)