By Ken Ukaoha
The National Association of Nigerian Traders
(NANTS) has examined the recent Nigeria-China currency swap deal, which has
been in the pipeline since 2016 and was finally consummated on April 27, 2018.
We recall specifically that that on April 13, 2016, the Central Bank of Nigeria
(CBN) and the Industrial and Commercial Bank of China Ltd (ICBC) signed a
currency swap deal on behalf of both Countries. NANTS believes that the final
signing the deal worth $2.5 billion by the Federal Government of Nigeria is a
significant exhibition of wisdom, high political will, and courage on the part
of the current administration to advance trade as a vehicle for economic growth
and development in Nigeria, and must therefore be commended.
(NANTS) has examined the recent Nigeria-China currency swap deal, which has
been in the pipeline since 2016 and was finally consummated on April 27, 2018.
We recall specifically that that on April 13, 2016, the Central Bank of Nigeria
(CBN) and the Industrial and Commercial Bank of China Ltd (ICBC) signed a
currency swap deal on behalf of both Countries. NANTS believes that the final
signing the deal worth $2.5 billion by the Federal Government of Nigeria is a
significant exhibition of wisdom, high political will, and courage on the part
of the current administration to advance trade as a vehicle for economic growth
and development in Nigeria, and must therefore be commended.
NANTS further believes that the secured agreement
would help in providing adequate local currency liquidity to Nigerian and
Chinese industrialists and other businesses, thereby reducing the demand for
dollar and the attendant difficulties encountered in the search for third
currencies. This smart move, which is long overdue, in NANTS estimation, would
ease the lingering exchange rate crisis which has been heightened by the
country’s high volume of imports. We, therefore, see the deal as a strategic
move that would gradually strengthen the Naira against the US dollar and,
certainly, reduce attention to and/or the unwitting dollarisation of the
nation’s economy. While we do not have anything against the US dollar, we
however note that its scarcity has remained a nightmare and punishment to the
average Nigerian trader.
would help in providing adequate local currency liquidity to Nigerian and
Chinese industrialists and other businesses, thereby reducing the demand for
dollar and the attendant difficulties encountered in the search for third
currencies. This smart move, which is long overdue, in NANTS estimation, would
ease the lingering exchange rate crisis which has been heightened by the
country’s high volume of imports. We, therefore, see the deal as a strategic
move that would gradually strengthen the Naira against the US dollar and,
certainly, reduce attention to and/or the unwitting dollarisation of the
nation’s economy. While we do not have anything against the US dollar, we
however note that its scarcity has remained a nightmare and punishment to the
average Nigerian trader.
Statistically, we note that in 2015, Nigeria’s
trade volume with China rose to $14.94 billion, representing 22.2 per cent of the
$78.56 billion it traded with her eight biggest partners. At present, about
78.1 per cent of the nation’s import of consumables comes from the Asian Tiger,
and these are items that flow into the market space in large volumes and
turnover. As the umbrella body of Nigerian traders, it is worthy of note that
in our calculation close to 68 per cent of traders regularly leaving the shores
of the country at the various airports for imports on daily basis are heading
towards the Chinese market. It, therefore, makes a lot of sense to tie the nuts
with the Chinese currency, not only to facilitate seamless transactions, but
also to reduce the multiple jeopardy faced by traders and importers who would
exchange the local Naira to Dollar and from Dollar back to Chinese Yuan,
thereby losing currency value at two poles. More so, the currency swap implies
that Chinese Yuan is free to flow among different financial institutions in
Nigeria just as is the case with the US dollar, Euro and Pounds Sterling, and
to that end, Nigerian businesses could transfer funds to China in the local
currency without the hassles of passing through bureau de change or creating
unnecessary stress for the CBN.
trade volume with China rose to $14.94 billion, representing 22.2 per cent of the
$78.56 billion it traded with her eight biggest partners. At present, about
78.1 per cent of the nation’s import of consumables comes from the Asian Tiger,
and these are items that flow into the market space in large volumes and
turnover. As the umbrella body of Nigerian traders, it is worthy of note that
in our calculation close to 68 per cent of traders regularly leaving the shores
of the country at the various airports for imports on daily basis are heading
towards the Chinese market. It, therefore, makes a lot of sense to tie the nuts
with the Chinese currency, not only to facilitate seamless transactions, but
also to reduce the multiple jeopardy faced by traders and importers who would
exchange the local Naira to Dollar and from Dollar back to Chinese Yuan,
thereby losing currency value at two poles. More so, the currency swap implies
that Chinese Yuan is free to flow among different financial institutions in
Nigeria just as is the case with the US dollar, Euro and Pounds Sterling, and
to that end, Nigerian businesses could transfer funds to China in the local
currency without the hassles of passing through bureau de change or creating
unnecessary stress for the CBN.
Furthermore, this deal, which makes Nigeria become
the third African country to have such an agreement in place with China, will
make it easier for Chinese manufacturers seeking to buy raw materials from
Nigeria to obtain enough Naira from banks in China to pay for their imports
from Nigeria. In summary, the Naira is expected to appreciate against the US
dollar in the short-term, as the demand for dollar eases. It will encourage
Nigerian importers to open Letters of Credit (L/Cs) in Yuan for the importation
of raw materials, equipment, and machinery from China. It will facilitate
greater foreign exchange transactions and promote bilateral trade relations
between Nigeria and China, eliminate the cost of exchange rate differential
caused by dollar exchange conversion and scarcity, ease the pressure on Naira
and potentially stabilise Nigeria’s forex market, help to conserve Nigeria’s
forex reserves, and shore up the value of the Naira in the foreign exchange
market. It is hopeful that the deal as an instrument of bilateral relationship
could encourage China to increase their imports from Nigeria, especially in
crude oil, solid minerals, and other raw materials, thereby closing the huge
trade gaps between the two countries.
the third African country to have such an agreement in place with China, will
make it easier for Chinese manufacturers seeking to buy raw materials from
Nigeria to obtain enough Naira from banks in China to pay for their imports
from Nigeria. In summary, the Naira is expected to appreciate against the US
dollar in the short-term, as the demand for dollar eases. It will encourage
Nigerian importers to open Letters of Credit (L/Cs) in Yuan for the importation
of raw materials, equipment, and machinery from China. It will facilitate
greater foreign exchange transactions and promote bilateral trade relations
between Nigeria and China, eliminate the cost of exchange rate differential
caused by dollar exchange conversion and scarcity, ease the pressure on Naira
and potentially stabilise Nigeria’s forex market, help to conserve Nigeria’s
forex reserves, and shore up the value of the Naira in the foreign exchange
market. It is hopeful that the deal as an instrument of bilateral relationship
could encourage China to increase their imports from Nigeria, especially in
crude oil, solid minerals, and other raw materials, thereby closing the huge
trade gaps between the two countries.
While we commend the vision of the federal
government in this direction, NANTS, however, wishes to sound the following
notes of caution.
government in this direction, NANTS, however, wishes to sound the following
notes of caution.
• The currency swap deal (with its unrestricted
access to the Yuan, at an overvalued Naira exchange rate, N30/Yuan) has the
propensity to trigger increased volume of imports to the country. The surge in
Chinese imports if unchecked, especially given the history of appetite of
Nigerians for imported goods, would negate the federal government’s import
substitution agenda, stifle domestic production and place local industries in a
pitiable and vulnerable condition with attendant effects that would defeat
government’s efforts at job creation. Against this backdrop, NANTS calls on the
government’s agencies and, in particular, the Nigeria Customs Service, to rise
up to its billing in order to guard the nation against unbridled influx of
goods.
access to the Yuan, at an overvalued Naira exchange rate, N30/Yuan) has the
propensity to trigger increased volume of imports to the country. The surge in
Chinese imports if unchecked, especially given the history of appetite of
Nigerians for imported goods, would negate the federal government’s import
substitution agenda, stifle domestic production and place local industries in a
pitiable and vulnerable condition with attendant effects that would defeat
government’s efforts at job creation. Against this backdrop, NANTS calls on the
government’s agencies and, in particular, the Nigeria Customs Service, to rise
up to its billing in order to guard the nation against unbridled influx of
goods.
• The CBN must ensure that constant oversight and
regulation is at its peak so that the rise in demand for the Yuan will not
result in a possible depreciation of the Naira against the Chinese currency and
further widen the gaps in trade balance and balance of payments in favour of
China.
regulation is at its peak so that the rise in demand for the Yuan will not
result in a possible depreciation of the Naira against the Chinese currency and
further widen the gaps in trade balance and balance of payments in favour of
China.
• NANTS calls on government agencies, such as the
Standards Organisation of Nigeria (SON), the National Agency for Food, Drugs
Administration and Control (NAFDAC), and the Consumer Protection Council (CPC),
to be alert and ready for combat to ensure that the currency swap deal and its
possible attendant surge in imports does not turn the country into a dumping
ground for inferior/substandard Chinese products. The existing trade deal
between Nigeria and China must be revisited and retooled at this moment to
strengthen control and sanction mechanism against irregular and sub-standard
exports from China targeting the Nigerian market.
Standards Organisation of Nigeria (SON), the National Agency for Food, Drugs
Administration and Control (NAFDAC), and the Consumer Protection Council (CPC),
to be alert and ready for combat to ensure that the currency swap deal and its
possible attendant surge in imports does not turn the country into a dumping
ground for inferior/substandard Chinese products. The existing trade deal
between Nigeria and China must be revisited and retooled at this moment to
strengthen control and sanction mechanism against irregular and sub-standard
exports from China targeting the Nigerian market.
• Nigerian business actors and the Nigerian Export
Promotion Council (NEPC), in particular, have an urgent call to duty against
the realisation that the currency deal not only opens the vista for imports
from China but also throws open the window of opportunities for Nigerian
exports to China that must be explored. In practical terms, NEPC must,
therefore, step up the collaboration with Nigerian traders and the Nigerian
representative/diplomatic offices in China to identify such local commodities
and items that could be exported to the Asian Tiger. NANTS believes that
Nigeria’s recent increase in agricultural productivity should dynamise efforts
towards exportable agro-commodities, which would further trigger proportionate
increase in productivity that will benefit farmers as well as industrialists.
In addition, government must sit up and aggressively pursue export-based
economic policies (including a predictable/secured business environment and
reliable trade policy enactment) as well as technology transfer agenda capable
of attracting and receiving Chinese and other investors to confidently engage
the nation’s economy for the expansion of their business interests.
Promotion Council (NEPC), in particular, have an urgent call to duty against
the realisation that the currency deal not only opens the vista for imports
from China but also throws open the window of opportunities for Nigerian
exports to China that must be explored. In practical terms, NEPC must,
therefore, step up the collaboration with Nigerian traders and the Nigerian
representative/diplomatic offices in China to identify such local commodities
and items that could be exported to the Asian Tiger. NANTS believes that
Nigeria’s recent increase in agricultural productivity should dynamise efforts
towards exportable agro-commodities, which would further trigger proportionate
increase in productivity that will benefit farmers as well as industrialists.
In addition, government must sit up and aggressively pursue export-based
economic policies (including a predictable/secured business environment and
reliable trade policy enactment) as well as technology transfer agenda capable
of attracting and receiving Chinese and other investors to confidently engage
the nation’s economy for the expansion of their business interests.
– Ukaoha is secretariat president of NANTS.
Culled from thisdaylive
