The economy of Nigeria really is in need of rapid help as the naira continues its shambolic fall against the dollar.
The naira is expected to continue to weaken this week on limited dollar supply as foreign portfolio investors stay on the sidelines until the Nigeria economy shows signs of recovering from the impact of currency controls, foreign exchange traders have said.
The naira had hit an all-time low of 334.50 per dollar on Wednesday, a day after the Central Bank of Nigeria hiked interest rates to try to lure foreign investors back into local assets, Reuters reported.
Forex traders said investors were pushing the naira lower to test the limit of how far it could fall, given a spread of almost 12 per cent between the official and black market dollar-naira exchange rates.
On Friday, the naira closed at 321.16 to the dollar at the interbank market, compared to 292.40 the previous Friday.
At the parallel market, the local currency closed at 380 against the greenback on Friday, compared to 378 a week earlier.
According to financial analysts and experts, the naira may weaken further, especially at the interbank market, if the CBN fails to intervene at the market this week.
“We are in a very challenging situation as a country and the CBN needs to do something urgently to stabilise the exchange rate at the interbank market,” analyst and Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, said.
He added, “If the CBN fails to intervene, the naira may fall further against the dollar at the interbank market. If it does, the naira may appreciate to say about 310/dollar. But the point is that the market needs sustained intervention until there is a calm that will assure the foreign investors that things are now normal.”
Chukwu believes the CBN may need to access close to $10bn facility from the World Bank to stabilise the forex market.
Meanwhile, Ghana’s cedi is expected to be firm, underpinned by inflows from offshore investors who bought government debt two weeks ago, Reuters reported.
The cedi is expected to trade steady against the dollar this week on residual forex inflows from investors who took part in a five-year domestic bond sale a fortnight ago.
The local unit has been fairly stable last week after settlement of the bond on Monday. It closed at 3.9620 to the dollar on Friday, stronger than 3.9650 a week earlier.
“The pair (cedi/dollar) is expected to remain fairly stable around 3.9650 levels on the market, even in the face of a steadily growing demand from importers,” an analyst at Dortis Research, Joseph Amponsah, said.
The Kenyan shilling is expected to post gains, boosted by expected inflows from foreign investors taking up government debt, wooed by a surge in rates.
Commercial banks quoted the shilling at 101.35/45 to the dollar, stronger than the previous week’s close of 101.45/65.
The Tanzanian shilling is seen buoyed by sagging dollar demand and increased inflows from large companies in tourism and agriculture sectors.