Naira devaluation, Inflation frustrating investment profitability—Ilodianya
The Chief Executive Officer of SFS Capital Nigeria Limited, Patrick Ilodianya, has decried the ripple effects of the twin evils of Naira devaluation and Inflation on investments in Nigerian economy.
Speaking in an interview, the development economist said “Naira devaluation and Inflation are very bad for naira-denominated investments. Both evils effectively reduce the profitability of your investment. However, doing nothing is far worse. As a Nigerian earning and spending naira, it is better to make an investment return of 20 per cent than have naira devaluation and inflation erode it to make a return of 0 per cent and still experience erosion.
However, Ilodianya averred that “Naira devaluation is sometimes positive for some investments like real estate. As Naira devalues real estate in Nigeria appears cheaper to foreign investors using foreign exchange. This in return drives up prices over the long run. However, this applies to mainly diaspora Nigerians who do not need to repatriate the funds back overseas.
He was quick to aver that “The biggest disadvantage of devaluation is that it prevents international investors from investing because devaluation aggressively erodes any profit made when they attempt to repatriate their profit. Generally, a naira profit usually results in a loss when converted back to dollars or foreign currency. International investments are normally the largest source of foreign currency and infrastructure investment available.
In the value of investment in the face of continued fall of naira, Ilodianya said “For a Nigerian earning and spending in naira, it is easier to achieve profitability despite the devaluation of the naira. However, most people prefer dollar-denominated investments like Eurobonds. Otherwise, high-yielding naira investments are your best bet to mitigate the losses from devaluation”.
