The Central Bank of Kenya has gone silent after failing to reassure the forex market and stop speculative trading behaviour. And since nature abhors a vacuum, this silence has led to pricing of the foreign currency by a margin of more than Sh. 10 by local banks.
A local business newspaper report shows that as at Tuesday noon, KCB Bank was buying dollars at 111.15 and selling at 129.1. This is a margin of Sh. 17.95.
This report also showed that Stanbic Bank was buying at 114.25 and selling at 125.45. NCBA Bank was buying the foreign currency at 114.25 while selling at 125.85. Equity Bank was buying at 114.4 and selling at 123.3 while GT Bank was buying at 116.25 while selling at 124.95.
The CBK officials currently put the rate of the US dollar at Sh. 117.5. According to NCBA Group chief executive John Gachora, there is a perception in the market of a shortage of dollars which has sparked the current crisis.
“There is a perceived demand of dollars. Hence to the market, the demand of dollars looks more than what it is, creating a sentiment on lack of dollars,” he said.
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Over the past few weeks that have seen the Kenya shilling hit new lows against the US dollar, the CBK has done nothing more than reject claims of dollar shortages.
According to the reserve bank, the country’s current FX market remains liquid with US dollar transactions rounding off to Sh. 233.5 billion ($2 billion) on average each month.
“For a sector such as manufacturing that importing goods worth between $90 and $100 million monthly, the figure is nowhere near the $2 billion we are putting out there,” said CBK Governor Patrick Njoroge when manufacturers lamented over a shortage of US dollars in the local market.
“Such players should understand that they are small in that sense and should go to market like anyone else. There are no favourites in the market. Follow the rules of the market and everything will be okay. It is interesting that some of the people writing to us don’t have positions and are not in the (FX) market, they are traders.”