Connect with us

News

Nigeria Finally Seals N720bn Currency Swap Deal with China

BellaNaija.com

Published

 on

Nigeria Finally Seals N720bn Currency Swap Deal with China

Godwin Emefiele and Dr. Yi Gang

The Central Bank of Nigeria (CBN) has signed a currency swap deal with the Peoples Bank of China (PBoC) worth Renminbi (RMB) 15 billion (about N 720 billion).

The deal is the product of about 2 years of negotiation, as news about the deal first surfaced in April 2016 following President Muhammadu Buhari‘s visit to China.

In a statement released on Thursday by CBN’s spokesperson Isaac Okorafor, governor of CBN Godwin Emefiele, led CBN officials while PBoC Governor, Dr. Yi Gang, led the Chinese team at the official signing ceremony in Beijing on Friday, April 27.

“The agreement is valid for three years and can be extended upon mutual consent,” PBoC said

The CBN statement read:

The transaction, which is valued at Renminbi (RMB) 16 billion, or the equivalent of about $2.5bn, is aimed at providing adequate local currency liquidity to Nigerian and Chinese industrialists and other businesses thereby reducing the difficulties encountered in the search for third currencies.

Among other benefits, this agreement will provide Naira liquidity to Chinese businesses and provide RMB liquidity to Nigerian businesses respectively, thereby improving the speed, convenience and volume of transactions between the two countries.

It will also assist both countries in their foreign exchange reserves management, enhance financial stability and promote broader economic cooperation between the two countries.

With the operationalisation of this agreement, it will be easier for most Nigerian manufacturers, especially small and medium enterprises (SMEs) and cottage industries in manufacturing and export businesses to import raw materials, spare-parts and simple machinery to undertake their businesses by taking advantage of available RMB liquidity from Nigerian banks without being exposed to the difficulties of seeking other scarce foreign currencies.

The deal, which is purely an exchange of currencies, will also 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.

Indeed, the deal will protect Nigerian business people from the harsh effects of third currency fluctuations. With this, Nigeria becomes the third African country to have such an agreement in place with the PBoC.

Both the Nigerian and Chinese officials expressed delight at the conclusion and signing of the agreement and expressed the hope that it would boost mutually beneficial business transactions between Nigeria and the Peoples Republic of China.

PBoC, in a statement on its website said:

On April 27, 2018, with the approval of the State Council, the People’s Bank of China signed a bilateral local currency swap agreement with the Central Bank of Nigeria in Beijing for the purpose of facilitating bilateral trade and direct investment, and safeguarding financial market stability in both countries. The size of the swap facility is RMB 15 billion/NGN 720 billion. The agreement is valid for three years and can be extended upon mutual consent.

8 Comments

  1. Smh

    May 3, 2018 at 6:37 pm

    YOUR FATHERS ARE SELLING OUR COUNTRY TO THE CHINESE! RIGHT BEFORE OUR VERY EYES. WHY IS NO ONE PAYING ATTENTION

  2. Sherlie Holmes

    May 3, 2018 at 6:59 pm

    This is a complete joke.

    “This agreement will provide Naira liquidity to Chinese businesses” I already know how this is going to play out…

    • BBB

      May 3, 2018 at 9:22 pm

      Pls share.

      Its all packaged looking good but I suspect to something is not right.

  3. gbaskelebo

    May 3, 2018 at 10:13 pm

    If the apex body really did their due diligence on this transaction (swap deal) it may work to strengthen the Naira mainly against the dollar, that is if proper checks are in place and all go as plan. I wont say it is a bad one. well lets see how it goes… what do I know? unto second base tinz joor!

  4. Lol

    May 3, 2018 at 10:55 pm

    I am so worried about China’s self serving policies in Africa esp with the crop of people in power representing us. I don’t have a good feeling about this one, more likely one way traffic of Chinese goods n individuals to naija. Their track record of late in both developing and developed countries is not good and their human right and trade ethics are not confidence inspiring.

  5. Jam

    May 4, 2018 at 1:16 am

    Bella, I know I might sound dumb, but can you actually dumb articles like this down for us? Some readers understand but I’m not sure what the impact of this means to us as a country. With a lot of the articles you post concerning policy and stuff it really flies over our heads – well, at least mine. Please, try to break it down in plain English. Thanks.

    • TLC

      May 4, 2018 at 8:11 pm

      Not sure they can dumb it down cause it’s all mostly copied & pasted on here anyways! What they need is an analyst that will explain what this swap deal is exactly, the advantage of it to the Nigerian economy & how (if it will) it will actually help businesses ! Bella you should be able to have an economist or something that can break it down! If na fashion now we go see all the analysts but pretty vital things like this Nahh! Rahhhh! Sorry for any typos x

    • Aare farmland

      May 5, 2018 at 1:09 pm

      hmmm, the first three paragraphs are what is important, the others are just government PR to justify the swap deal. The way I read it, if you are a Nigerian importer(good standing with your bank’s hierarchy or government) or business importing from China, you do not need to have access to the dollar or a dollar denominated domiciliary account from your bank to pay the Chinese supplier. What they did not include which may complicate it is that both countries of agreed to an exchange rate or terms of exchange for the $2.5b worth of goods. Your naira account can be exchanged for Renminbi. The same with a Chinese businessman investing in Nigeria, he will have access to the naira from Chinese banks to do business in the country. In simple terms, both countries do not want to increase trade in dollars which is the dominant currency and easily convertible currency in international trade. Nigeria’s trade in china is increasing and this will give the country a route to directly convert the naira to renminbi instead of converting it to dollars and transferring it to China. The complicated side is from China. China owns dollar denominated assets abroad. Hundred of billions in U.S. debt, but if they reduce their significant U.S. holdings, the market will respond with a dollar depreciation. For example if they own $500b and and want to reduce it to $450, because of supply and demand, the market will respond by depreciating the dollar and instead of $450 remaining, the purchasing power of the $450b will be around $400b. So the Chinese are trying to hedge the risk of holding to many assets in dollars by promoting the use of their currency in international trade.

      Now the second speculative agenda, this is Nigeria. They may want to increase foreign exchange reserves in renminbi. Sanusi supported this idea before. So instead of our foreign exchange to be in dollars they may want to diversify it, same as the Chinese are trying to do.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Get The Pan-Atlantic Advantage

Star Features

Advertisement
css.php