Investec Asset Says Nigeria's Naira Stance Not Sensible Policyby
Naira devaluation coming, Investec's Du Toit Says at WEF
Overvalued naira distorting economy, stoking speculation
Investec Asset Management Ltd., which has about $1 billion invested in Nigeria, says the country’s refusal to devalue its currency and relax import controls “is not a sensible policy.”
Nigerian 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 on Wednesday. “Ultimately, the government is going to be ahead of the curve, or it’s going to be forced.”
On Wednesday, Nigerian 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.