Naira Devaluation Coming -Investec

Investec Asset Management Ltd., which has about $1 billion invested in Nigeria, has said the country’s refusal to devalue the Naira and relax import controls “is not a sensible policy” and predicated possible devaluation of the local currency soon.

Investec Asset Management, which is a specialist investment manager, providing a range of products to institutional and individual investors, internationally insisted that overvalued Naira is distorting economy and stoking speculation.

Bloomberg reported that President Muhammadu Buhari has resisted calls from investors and the International Monetary Fund to devalue the naira, which has officially been pegged at 197-199 per dollar since March 2015.

The black-market exchange rate, which most businesses have been forced to use, is roughly 320 per dollar. Foreign-exchange trading restrictions and import curbs have led to shortages of goods from gasoline to milk.

“We need the political will to accept that a market-set exchange rate works better,” Hendrik du Toit, Investec Asset’s chief executive officer, said in an interview at the World Economic Forum on Africa in Kigali, Rwanda.

“Ultimately, the government is going to be ahead of the curve, or it’s going to be forced.”

On Wednesday, Vice President Yemi Osinbajo told a conference in Lagos that the country needs a “substantial review” of its foreign-exchange policies, including further consideration about devaluing the naira. Africa’s largest economy is growing at its slowest rate since 1999 as oil revenue declines due to a plunge in crude prices and the lowest production in more than 20 years.

“The shortages of dollars are distorting the economy, distorting economic activity and ultimately therefore leading to all sorts of speculation, unproductive activity and a complete misunderstanding of the risks,” Investec’s Du Toit said. “All I know is it’s coming,” he said of the possibility of a devaluation.