Naira and Four African Currencies Projected to Extend Gains Against US Dollar
The Nigerian naira is currently trading at one of its strongest positions in two years, with financial analysts forecasting additional appreciation in the coming days. This positive trend isn't isolated to Nigeria, as several other African currencies are also expected to demonstrate robust performance against the US dollar in the near future.
Naira's Remarkable Recovery and Current Standing
Over the past ten trading sessions, the naira has shown impressive strength, appreciating by N52.75 against the US dollar. The currency moved from N1,418.95 on Monday, January 26 to N1,366.19 by Friday, February 6, marking significant progress in Nigeria's foreign exchange market.
Multiple factors contribute to the naira's resurgence:
- Improved foreign exchange supply through official channels
- Strong oil receipts benefiting from favorable global prices
- Renewed inflows from foreign investors attracted by high yields on Nigerian government debt
On the parallel market, commonly referred to as the black market, the naira traded around N1,445 per dollar. Currency traders suggest that stronger demand at upcoming bond auctions could potentially push the currency toward N1,350 per dollar, indicating further room for appreciation.
Comparative Exchange Rates for Naira
As of recent trading sessions, the naira's exchange rate against major global currencies presents the following snapshot:
- CFA: N2.45
- Chinese Yuan/Renminbi: N196.88
- Danish Krona: N215.90
- Euro: N1,612.52
- Japanese Yen: N8.70
- Saudi Riyal: N364.28
- South African Rand: N84.76
- Special Drawing Rights (SDR): N1,878.11
- Swiss Franc: N1,756.71
- British Pounds Sterling: N1,857.75
- US Dollar: N1,366.20
Other African Currencies Showing Strength
Zambia's kwacha is another African currency expected to maintain its positive trajectory. The currency benefits from improving macroeconomic conditions and resilient copper prices, which represent Zambia's primary export commodity. According to Reuters reports from Thursday, February 5, the kwacha traded at 19.09 per dollar, strengthening significantly from 20.29 just a week earlier.
Economist Kelvin Chisanga noted that recent central bank measures restricting foreign-currency usage have provided additional support for the kwacha's appreciation against major global currencies.
Meanwhile, currencies in Kenya and Uganda are projected to remain relatively stable according to market traders, showing consistent performance without dramatic fluctuations expected in the near term.
Ghana's Cedi Faces Different Challenges
In contrast to the positive outlook for the naira and kwacha, Ghana's cedi may experience further weakening due to strong dollar demand from the country's energy sector. The cedi was last quoted at 10.95 per dollar, slightly below the 10.90 rate recorded a week earlier.
Financial analysts suggest that unfilled demand at central bank foreign exchange auctions could maintain dollar strength against the cedi in the immediate future. Data from LSEG confirmed the cedi traded at 10.95 per dollar, marginally lower than the previous week's 10.90 rate.
Andrews Akoto, head of trading at Absa Bank Ghana, observed that the dollar could remain strong against the cedi due to unmet demand at recent central bank foreign exchange auctions. Another trader added that continued excess demand for dollars might push the cedi lower in the coming days, presenting a different trajectory from its West African counterpart, the naira.
Supporting Factors for Naira's Strength
Nigeria's foreign exchange reserves have recorded a significant increase, substantially boosting the Central Bank of Nigeria's efforts to support the naira's recovery. The CBN has reaffirmed its commitment to intervene in foreign exchange markets to enhance liquidity and alleviate demand pressure on the national currency.
Foreign reserves serve as a crucial buffer to support the stability of the Nigerian currency in international foreign exchange markets. This strategic reserve accumulation, combined with proactive monetary policies, creates favorable conditions for the naira's continued appreciation against major global currencies.
The contrasting fortunes of African currencies highlight the diverse economic conditions and policy approaches across the continent. While Nigeria's naira and Zambia's kwacha benefit from specific economic advantages and policy measures, Ghana's cedi faces different market pressures that may lead to continued challenges in the foreign exchange arena.
