Kenya shilling firms up as dollar inflows enter local market from foreign investors

NAIROBI: Kenya’s shilling firmed yesterday after hard currency inflows entered the market from foreign investors fleeing Nigeria’s faltering economy, while others were chasing yields on government debt.

Commercial banks quoted the shilling at 91.10/20 to the dollar, stronger than Wednesday’s close of 91.15/25 to the dollar. “With what’s happening in Nigeria, everyone is getting scared. So they are really coming in massive chunks to invest in Kenya,” said Sheikh Mehran, head of trading at I&M Bank.

“There is a major reallocation of assets.” Nigeria, Africa’s biggest economy and the continent’s largest oil producer, is facing a faltering economy after global oil prices plunged, weakening its naira currency.

Political uncertainty following a six-week delay in its presidential elections has worsened the outlook, sending its financial markets into a tailspin. Traders said a Kenyan infrastructure bond worth Sh25 billion to be sold on March 25 was also attracting inflows from foreign investors.

“We could see some further gains, especially with expected inflows for the upcoming infrastructure bonds,” said Duncan Kinuthia, head of trading at Commercial Bank of Africa.

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The shilling has in the past week also received support from regular liquidity mop ups by the Central Bank. Yesterday, the Central Bank sought to mop up Sh6 billion from the money markets. Mopping up liquidity supports shilling by making it costlier to hold dollars.

Meanwhile, on the Nairobi Securities Exchange, the main NSE-20 Share Index was down 50.03 points, to close at 5,411.05 points. Traders said the drop was a correction as investors sold to cash in their gains made in the recent past.