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Economy

Safaricom's dollar demand tanks shilling to record low

The shilling has weakened to a record low of 108.45 units against the dollar
The shilling has weakened to a record low of 108.45 units against the dollar. FILE PHOTO | NMG 

The shilling has weakened to a record low of 108.45 units against the dollar, erasing gains made last week, with traders linking this on demand for the US currency from Safaricom ahead of Sh56.09 billion dividends payout.

Wednesday’s poor run marked the ninth straight day of weakening for the shilling after gaining against the dollar, to close July at 107.70.

This means it has lost 0.75 units since August started.

The weakening that started on July 6 when Kenya started phased reopening of the economy had reduced in the closing weeks of the month after importers stocked their goods.

Traders are attributing the latest fall on heightened demand of the foreign currency by Safaricom, the most profitable firm in the region, ahead of its record final dividend payout at the end of the month.

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“Safaricom is buying dollars from the market to repatriate dividends so that is putting pressure on the shilling given they have to do it by end of August,” said a top trader who sought anonymity.

The telco announced a final dividend of Sh1.40 per share amounting to Sh56.09 billion, up from Sh1.25 or total of Sh50.1 billion paid in the previous year. The payout will be made on or before end of August.

Vodafone Group, which owns 40 percent stake in the telco will pocket Sh22.4 billion. It is usually paid in dollars.

This means the telco has to buy dollars to meet this payout. The National Treasury will get Sh19.6 billion for its 35 percent stake.

The latest fall means the shilling has shed 6.03 units or 5.89 percent of its value when compared with 102.42 units on March 13 when Kenya reported its first Covid-19.

The fall has become more pronounced since July 6 when President Uhuru Kenyatta opened up Nairobi, Mombasa and Mandera counties and announced resumption of local air transport.

The Central Bank of Kenya (CBK) blamed the weakening performance on unevenly matched demand and supply of dollars in the interbank market.

CBK maintains that its forex reserves of $9.29 billion or 5.64 months import cover, is adequate arsenal to deal with volatilities.

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