Business Nigeria will Devalue Naira Slowly & Gradually- S&P

[LequteMan]

Ratings agency Standard & Poor's on Thursday reiterated that Nigeria will have to devalue its currency. The agency expects this to happen at some stage in 2016 and in gradual adjustments.

"Their line has been to try to hold it as much as possible, and they are trying to continue that policy...alongside the restrictions on imports as well," said Ravi Bhatia, Director of Sovereign and International Public Finance at Standard & Poor's.

"But at some point they are going to have to move, but I think they are going to try and do it incrementally and not (in) big jumps," Bhatia told reporters in a briefing, adding he expected this to happen in one or two increments.

Brent crude accounts for about 95 percent of foreign earnings. A devaluation would only go some way to improve Nigeria's situation, said Bhatia.

"It will help a little, but the problems aren't going to go away - there is no easy avenue for them really," he said.

He saw government talk of shifting to non-oil revenue as "overstated" and not easy to do.

"(Nigeria) is going to face a very tough year in 2016."

Investors have seen a devaluation of the naira as long overdue for Africa's largest economy and biggest oil exporter, which has been battered by the tumble in crude prices.

The country's government however has blamed negative speculations as responsible for the Naira's depreciation, refusing to devalue the currency.


Reuters

 

[Efua Gbadamosi]

S&P at it again with prescriptive comments, well reminds me of the forced revaluation on China Yuan in 2005 to serve Western interest because the undervalued Chinese Yuan was hurting US and Japan domestic economies thereby forcing the Chinese to abandon the Fixed exchange currency system to Managed float system (which is being used till date). We do not have the support system to accommodate the shock from devaluation now. I suspect our situation is not as bad as being portrayed if we consider the following; Is government still paying subsidy on PMS? the answer is no, so the funds being saved from non subsidy payment should cushion the effect of falling crude prices....? Are we being distracted with all these probing and corruption noise and some new theft is being perpetrated..? The fundamentals that determine the balance of equilibrium of exchange rates have not moved too adversely against Nigeria if you consider the above..why is the Naira sliding on a roller coaster? Is it a policy problem? Have we engaged competent hands in finance and money policy directions? i think Nigerians should start asking pointed questions now.