By Peter OBIORA InvestAdvocate

Lagos (INVESTADVOCATE)-Rating services firm, Standard & Poor’s said on Thursday Nigeria will have to devalue the naira at some point in 2016 and in gradual adjustments, according to a Reuters report.

The report affirmed that investors have seen a devaluation of the naira as long overdue in Nigeria which has been greatly weakened by the slump in oil prices.

According to the report, despite growing pressure, Nigeria’s government has kept the naira pegged at around N198 to the dollar on the official interbank market, while restricting access to dollars.

“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 was quoted as telling reporters in a briefing, adding he expected this to happen in one or two increments.

The report further affirmed that Nigerian non-deliverable currency forwards, a derivative product used to hedge against future exchange rate moves, indicated markets expected the naira exchange rate at N265.00 to the dollar in six months time, and at N284.00 to the dollar in 12 months’ time.

The director of Sovereign and International Public Finance at Standard & Poor’s noted that Brent crude accounts for about 95 percent of Nigeria’s foreign earnings and a devaluation would only go some way to improve the country’s situation.

“It will help a little, but the problems aren’t going to go away – there is no easy avenue for them really,” he said.

According to Bhatia, Nigeria’s government talk of shifting to non-oil revenue is “overstated” and not easy to do. “(Nigeria) is going to face a very tough year in 2016,” he said.