African FX Outlook: Naira Stable, Cedi Under Fresh Pressure

Most major African currencies are expected to remain broadly stable over the coming week, supported by easing demand for U.S. dollars and central bank interventions in several markets. However, Ghana’s cedi is forecast to remain under pressure as corporate demand for foreign exchange picks up, according to traders surveyed by Reuters.

Nigeria’s naira is expected to trade within a narrow range over the next week, with regular dollar sales by the Central Bank of Nigeria helping to keep the currency steady.

The naira traded at 1,375 per U.S. dollar on the official market on Thursday, strengthening slightly from 1,377 recorded a week earlier. On the parallel market, the currency exchanged at around 1,395 per dollar.

Market participants expect the naira to trade between 1,375 and 1,380 against the dollar in the coming days. According to one trader, demand pressure created by investors taking profits at the end of the first half of the year has begun to ease, reducing pressure on the local currency.

Uganda’s shilling expected to remain steady

The Ugandan shilling is also projected to maintain its recent stability as demand for foreign currency from importers and commercial banks continues to soften.

Commercial banks quoted the shilling at 3,660/3,670 per dollar on Thursday, an improvement from 3,690/3,700 a week earlier.

Traders attributed the calmer market to slowing demand for dollars, partly influenced by developments in the energy sector. They expect the currency to fluctuate within the 3,650 to 3,670 range against the U.S. dollar over the next several days.

Zambia’s kwacha supported by mining sector

Zambia’s kwacha is forecast to remain relatively stable despite a slight weekly decline, supported by stronger mining production and improved foreign exchange inflows into Africa’s second-largest copper-producing nation.

The currency traded at 18.45 per dollar on Thursday, compared with 18.20 a week earlier.

Kenya’s shilling continues stable run

Kenya’s shilling is expected to extend its prolonged period of stability.

Commercial banks quoted the currency at 129.15/129.25 per dollar, compared with 129.45/129.65 at the close of trading last Thursday, reflecting only modest movements in the foreign exchange market.

Ghana’s cedi likely to weaken further

Unlike most of its regional peers, Ghana’s cedi is expected to remain under pressure amid rising corporate demand for dollars and a reduction in foreign exchange support from the Bank of Ghana.

LSEG data showed the cedi trading at 11.34 per U.S. dollar on Thursday, weaker than 11.20 recorded a week earlier.

Market analysts say increasing demand for foreign currency to finance imports and facilitate dividend repatriation is likely to weigh further on the local currency.

Andrews Akoto, Head of Trading at Absa Bank Ghana, said the cedi could continue to depreciate steadily as corporate demand for foreign exchange strengthens. He also noted that the central bank plans to reduce its foreign exchange market interventions in July to about $1 billion, after supplying an additional $811 million beyond its initial $1.2 billion target in June.

While Ghana may face renewed pressure in the short term, traders expect most other major African currencies—including the Nigerian naira, Ugandan shilling, Zambian kwacha and Kenyan shilling—to remain broadly stable through next week as market conditions stay relatively calm.