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Nigeria will have to devalue its currency at some stage, possibly by more than 15 percent, ratings agency Standard & Poor’s said on Wednesday, though it saw the adjustments as likely to be gradual.
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 recent tumble in crude prices, reports Reuters..
Following devaluations in November and February, authorities have focused recently on curbing access to hard currency on the official interbank market for importers of some goods, introducing stringent restrictions three weeks ago.
But those measures just delay the inevitable, said Ravi Bhatia, director of sovereign ratings at Standard & Poor’s.
“Another devaluation is inevitable… they will have no option but to devalue,” said Bhatia at a media briefing.
Many investors are positioning for a devaluation of around 15 percent. Bhatia said that sounded “reasonable”, though even more might be needed.
Non-deliverable forwards – derivatives used to hedge against future exchange rate moves – reflect expectations of currency weakening: six-month NDFs price the naira at 233 per dollar, some 18 percent weaker than the central bank pegged rate of 196.95 on Tuesday..
On Wednesday, the naira hit another record low of 242 against the dollar on the parallel market operated by dealers in bureaux de change, down 0.42 percent from Tuesday. The naira has been hitting record lows on the parallel market since the latest central bank measures introduced three weeks ago.
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