Naira may weaken on increased dollar demand – Analysts

The naira may depreciate marginally on the black market in the days ahead on an expected increase in dollar demand by small businesses and people planning for summer holidays, according to analysts.

The local currency was quoted at 368 to the United States dollar on the black market on Thursday, compared with 365 a dollar it traded last Thursday, Reuters reported.

It was learnt that commercial banks were yet to put up a quote on the interbank market.

“We are expecting a slight depreciation in the value of the naira as we approach the summer holiday period for many Nigerians unless the central bank increases dollar supply to the market to cater for the likely surge in demand,” one currency trader told Reuters.

The naira recorded a marginal gain on Wednesday, closing at 367 per United States dollar up from 368 on Tuesday.

The local currency has been hovering between 363/dollar and 370/dollar as the Central Bank of Nigeria continues to supply foreign exchange into the market.

The CBN had sold $195m in various segments of the inter-bank market on Wednesday, the first day of transaction after the Eid-el-Fitr celebration.

A breakdown of the intervention indicates that authorised dealers in the wholesale window segment received a $100m offer from the bank, while the Small and Medium-scale Enterprises and invisibles windows were allocated the sums of $50m and $45m, respectively.

Meanwhile, Ghana’s cedi is expected to gain ground against the dollar next week, while Kenya’s shilling is forecast to weaken, according to traders.

The Kenyan shilling is forecast to weaken due to retail merchants and oil importers buying dollars amid weak supply from foreign investors buying government securities, traders said.

Commercial banks quoted the shilling at 103.75/85 per dollar, compared with 103.75/55 at last Thursday’s close.

“Dollar supply side has become weaker, jittery demand from importers buying dollars to meet short-term liquidity needs,” a trader from a commercial bank said.

The kwacha is expected to remain steady with a bias to appreciating slightly towards the end of next week as companies convert hard currency to the local unit to pay taxes.