The news that Nigeria has signed a currency deal with China allowing the free flow of the Chinese Yuan amongst Nigerian banks (https://www.thecable.ng/nigeria-china-sign-deal-on-free-flow-of-Yuan) is arguably one of the best (or worst?) policies so far of the Buhari Administration.

Banks would now be able to settle payments directly from Naira to Yuan, rather than from Naira to black market Dollar and then to Yuan. In fact, an extension of this is that debit and credit cards can now be issued and denominated in Yuan. A sizeable portion of the local Dollar demand is thus eliminated, reducing the pressure on our Dollar reserves.

To boost our Yuan liquidity, the Chinese loans being negotiated by the Federal Govt may be availed partly or wholly in Yuan. This will greatly boost Nigeria’s Central Bank and commercial banks’ Yuan liquidity. In fact, the Nigerian and Chinese Govts are reported to have entered into a framework arrangement for currency swaps as a means of providing the much needed liquidity.

At current rates of 30.74 Naira to the Yuan, and 6.74RMB (Yuan) to the Dollar, Nigeria would be able to fund its importation at the equivalent of the current official rate of N199/$1.

PROS

This policy will lead to a reduced demand for Dollars and easing off of pressure on our Dollar reserves, as a large portion of Nigeria’s import needs are served by China (China is Nigeria’s largest trading partner – http://www.premiumtimesng.com/business/business-interviews/188666-china-tops-u-s-as-nigerias-biggest-trade-partner.html). Deals such as Dangote’s purchase of 3400 trucks (http://venturesafrica.com/dangote-group-signs-deal-for-3400-trucks-supply/) will henceforth be settled in Yuan rather than scarce Dollar reserves, which would then be sufficient to service other legitimate investor demands such as portfolio investments, capital repatriation, etc.

This policy also implies cheaper imports from China as importers from China would import at the equivalent of the current official rate of N199/$1 as against the current parallel market rate of N320/$1.

CONS

This policy may keep Nigeria as an importation-dependent economy. Due to its deliberate policies towards boosting its economics of scale, China produces most goods at a comparative advantage. While we have decried the importation of toothpicks and the likes from China, we must bear in mind that we import toothpicks not because we do not have bamboo and other raw materials in Nigeria, but because China is able to bring these goods to the Nigerian market at a much cheaper price than the one produced right here in Nigeria. The reasons are not far-fetched; the availability of infrastructure, cheap labour and use of manufacturing clusters. This policy would therefore sound a death-knell to the resurgent local production of importation substitutes.

Again, this policy would only bear the projected fruits if and only if the Nigerian factor doesn’t come into play. As demand for Yuan surges, a parallel market for Yuan may soon be created, bringing us back to this same point many years after.

WHITHER NIGERIA?

This policy should not be viewed as a solution to Nigeria’s Dollar dependency as we may otherwise inadvertently create a Yuan dependency. At the very best, this policy should be a stop-gap, a short-term measure devised to keep things in place while we sort out our infrastructural and policy challenges. The future prosperity of Nigeria lies in production for local consumption and export, and not the consumption of foreign imports.

Maxwell Asowata, Legal Practitioner and Business Consultant, writes from Lagos, Nigeria.

Source - http://ecstasyhouseng.com/index.php/2016/04/13/free-flow-of-yuan-in-nigerian-banks-what-you-need-to-know/

Interesting..
Well explained
Waiting for pro nairalanders to enlighten me better
Still seeping my raw kai kai


On the other hand
Hope Ali express will have a place for yuan..
Never the less pmb is still dull and unbearably naive








Second time on FTC
After 5yrs and I still don't know the big deal with this rush for ftc

This would go a long way if Nigerians dont abuse the policy...good one from the dullard

sekeyso:
This would go a long way if Nigerians dont abuse the policy...good one from the dullard

The challenge with Nigeria's policy making has never really been with conceptualization, but with implementation vis a vis the actualization of the policy objectives for the benefit of the man on the street.

Still, I believe in Nigeria.

maxxy:
The news that Nigeria has signed a currency deal with China allowing the free flow of the Chinese Yuan amongst Nigerian banks (https://www.thecable.ng/nigeria-china-sign-deal-on-free-flow-of-Yuan) is arguably one of the best (or worst?) policies so far of the Buhari Administration.

Banks would now be able to settle payments directly from Naira to Yuan, rather than from Naira to black market Dollar and then to Yuan. In fact, an extension of this is that debit and credit cards can now be issued and denominated in Yuan. A sizeable portion of the local Dollar demand is thus eliminated, reducing the pressure on our Dollar reserves.

To boost our Yuan liquidity, the Chinese loans being negotiated by the Federal Govt may be availed partly or wholly in Yuan. This will greatly boost Nigeria’s Central Bank and commercial banks’ Yuan liquidity. In fact, the Nigerian and Chinese Govts are reported to have entered into a framework arrangement for currency swaps as a means of providing the much needed liquidity.

At current rates of 30.74 Naira to the Yuan, and 6.74RMB (Yuan) to the Dollar, Nigeria would be able to fund its importation at the equivalent of the current official rate of N199/$1.

PROS

This policy will lead to a reduced demand for Dollars and easing off of pressure on our Dollar reserves, as a large portion of Nigeria’s import needs are served by China (China is Nigeria’s largest trading partner – http://www.premiumtimesng.com/business/business-interviews/188666-china-tops-u-s-as-nigerias-biggest-trade-partner.html). Deals such as Dangote’s purchase of 3400 trucks (http://venturesafrica.com/dangote-group-signs-deal-for-3400-trucks-supply/) will henceforth be settled in Yuan rather than scarce Dollar reserves, which would then be sufficient to service other legitimate investor demands such as portfolio investments, capital repatriation, etc.

This policy also implies cheaper imports from China as importers from China would import at the equivalent of the current official rate of N199/$1 as against the current parallel market rate of N320/$1.

CONS

This policy may keep Nigeria as an importation-dependent economy. Due to its deliberate policies towards boosting its economics of scale, China produces most goods at a comparative advantage. While we have decried the importation of toothpicks and the likes from China, we must bear in mind that we import toothpicks not because we do not have bamboo and other raw materials in Nigeria, but because China is able to bring these goods to the Nigerian market at a much cheaper price than the one produced right here in Nigeria. The reasons are not far-fetched; the availability of infrastructure, cheap labour and use of manufacturing clusters. This policy would therefore sound a death-knell to the resurgent local production of importation substitutes.

Again, this policy would only bear the projected fruits if and only if the Nigerian factor doesn’t come into play. As demand for Yuan surges, a parallel market for Yuan may soon be created, bringing us back to this same point many years after.

WHITHER NIGERIA?

This policy should not be viewed as a solution to Nigeria’s Dollar dependency as we may otherwise inadvertently create a Yuan dependency. At the very best, this policy should be a stop-gap, a short-term measure devised to keep things in place while we sort out our infrastructural and policy challenges. The future prosperity of Nigeria lies in production for local consumption and export, and not the consumption of foreign imports.

Maxwell Asowata, Legal Practitioner and Business Consultant, writes from Lagos, Nigeria.

Source - http://ecstasyhouseng.com/index.php/2016/04/13/free-flow-of-yuan-in-nigerian-banks-what-you-need-to-know/

I like ur analysis especially it to be used as a stop gap method, while we develop our own framework, this is a welcome development, but we should be careful lest it grows so high like the dollar.

Bubu just satisfied our greedy demand for foreign products!!

Oya let's switch to Yuan till it becomes 1 Yuan = 300 naira, we will find another country to swap with again!!!

Nigerians don't wana suffer but they want to be exporting!!

How is that possible??

Nice

Good one there. This agreement can be a win-win if the current administration formulates policies that would ease the importation of raw materials and make importation of finished products 99.98% impossible.

Outcomes: Reduction in the importation of finished products; surge in local production, labour and sales activities; stronger Naira; economic independence achievable etc.

BiafraBushBoy:
Bubu just satisfied our greedy demand for foreign products!!

Oya let's switch to Yuan till it becomes 1 Yuan = 300 naira, we will find another country to swap with again!!!

Nigerians don't wana suffer but they want to be exporting!!

How is that possible??

How is it possible to wean your citizenry off cheap imports by making importation attractive? As long as the Govt is not willing to religiously pursue a pro naija-made policy, we will keep going around in circles.

The future prosperity of Nigeria lies in production for local consumption and export, and not the consumption of foreign imports.

Maxwell Asowata, Legal Practitioner and Business Consultant, writes from Lagos, Nigeria.


Sound point!

At current rates of 30.74 Naira to the Yuan, and 6.74RMB (Yuan) to the Dollar, Nigeria would be able to fund its importation at the equivalent of the current official rate of N199/$1.


wait o, am I missing something here, like guys have been converting their nairas to yuan, then buy from US or UK at lesser rate with Chinese yuan o.

And I dey here dey wait make dollar come down b4 I reassume importation. chai, I dull, I dull.

wey my chrome book, ( starts browsing on how to convert my naira to yuan and then to dollar ). Thunder fire devil.

ok ooo

I hope this will bring $1=N1

This was Aptly written, However this shouldn't be an avenue to import more things into Nigeria, but Essential Raw materials used for Production. I'm Happy our Over Dependence on dollars would Reduce a bit

Right move...Wrong Time

Somebody is trying to piss America off by abandoning the Dollar for other currency...no nation has tried it and was successful at it especially in Africa.

Let it start flowing. Nigeria must be great by all means.

I think this would save naira for the time being

Ok..business men wiill. Love this..china Here I come

sekeyso:
This would go a long way if Nigerians dont abuse the policy...good one from the dullard

If your president is a dullard, then that makes you a Dundee

This is really good.
God bless Nigeria!
I love my country despite all odds.

OK... Am coming back to comment... Off too work

I am certain this is not true! Makes no economic sense as it will be massively abused

Is a short term fix for our economy.

Lolz... Very soon, Jackie Chan and Jet li will be our defense ministers. .

This will reduce the pressure on dollar. I think this is a good idea.

China is using Nigeria as part of their plan to dethrone USA as world power, the US won't be happy with this development.

I hope folks will not "round trip" with it!

What's the exchange rate. Naira to Yuan? And is this the time to buy the yuan for speculation?

I don't trust the Chinese.

Hmm

I hope PDP governors would not convert their dollars at home to Yuan abi yawn. That would put pressure and exchange rate would climb to 50+Yuan/NGN1.

Those leaders have damaged the economy with dollar business.