What's the direct immediate effect of the Yuan FX deal on importers from China.

Economics in the house help us with analysis. Thanks

Just hope it can apply to my dearly beloved Aliexpress n i will dance na k e d........
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In ma bathroom

This move by the Buhari administration is almost a strategic one. You'd recall that the Naira/USD exchange rate took a dive during those troubled periods once Nigerian importers who had made deposits with Chinese firms began to source for dollars to meet their varying commitments. That exchange rate would have seen less pressure, were they sourcing for the Yuan instead, a currency Chinese firms will accept. The trade between Nigeria and China was once recorded at over $11b dollars with, of course, the imbalance being to Nigeria's disfavour. But that's not the point; Nigeria has never really been an exporting country.

Nevertheless, it's obvious there's a lot of trade going on between the two countries. Since you couldn't exchange Naira directly for Yuan, but had to first obtain the USD, the various additional costs incurred during the two-stage transaction ensured Nigerian firms spent more money doing business with Chinese firms. In addition, by not first exchanging to the USD Nigeria can start reducing its dependence on the dollar. And now, I don't have to tell you how much the greenback swings the Nigerian market.

Not to get it wrong though. This will not increase the money in Nigeria's pocket, neither will it completely eliminate dependence on the dollar since some countries will not accept the Yuan while trading with Nigeria. In fact, Nigeria will have to convert a sizeable amount of its earning to the Chinese legal tender causing the country to hold less dollar. However, if a significant amount of trade is happening with China, there is no reason the Nigeria shouldn't have a Yuan trading hub.

The Naira will be the latest in a string of currencies which currently trade with the Yuan. There is already direct trade with the dollar, euro, yen, pound, the Australian Aussie, the New Zealand dollar, Russia's rouble, Swiss francs, the Singaporean dollar and the Malaysian ringgit. By joining the list of these countries, Nigeria is expressing its desire to take China seriously as a global economy and directly take on the benefits that come with that.

calddon:
Just hope it can apply to my dearly beloved Aliexpress n i will dance na k e d........
.


In ma bathroom

Hahhahahahah

We really need to know, how soon

But the longterm and short term effects should also be considered.

First off, big props to MathsChic for covering the essentials and for stating them out so well!

Bottom line is, if properly managed, it can help stabilize the naira and mitigate the consequences of the current economic crisis.

And like I said on another thread,

OrIandoOwoh:
Yuan?? No more dollar?? Buhari shouldn't sign us into perpetual slavery o..

It won't put us into perpetual slavery any more than the US dollar has.

Besides, this is a win-win.

China is making efforts to popularise the Yuan, while for Nigeria, it provides an opportunity to shore up foreign reserves and provides a trading window.

The dollar as world's reserve currency benefits the American Economy the most as it allows them access to cheap credit and a high percentage of government debt from the world's trust in its currency.


If for none other, we should be thankful that Mr president traveled this one time!

I don't know what percentage of our imports come from China but I can imagine that it's quite a bit.
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Without boring you with all the technical details, this should take of some pressure from the Naira/Dollar rate. The only problem is whether there will be enough Yuan Reserves in the country to meet imports, else we will just see a skyrocketing of the NGN/Yuan rate.
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China is really pushing itself as the next Super Power. The internationalization of the Remnimbi and the pushing of Yuan as an alternative world reserve currency is part of that strategic plan. Sadly, in Nigeria, all you hear about are primitive bickerings of cave men. No National strategy!

malton:

It won't put us into perpetual slavery any more than the US dollar has.

Besides, this is a win-win.

China is making efforts to popularise the Yuan, while for Nigeria, it provides an opportunity to shore up foreign reserves and provides a trading window.

The dollar as world's reserve currency benefits the American Economy the most as it allows them access to cheap credit and a high percentage of government debt from the world's trust in its currency.


If for none other, we should be thankful that Mr president traveled this one time!

Correct!
As soon as the USD became not "as good as gold", the US began enjoying the selfish benefits of having the dollar as the major currency for international trade. If the Chinese Yuan does become a more global currency, the countries that got on board first stand to benefit more from that.

CC: mathschic
Malton
Bevista

Thanks for the insight. I quite agree with Bevista about the opinion that if we don't have enough Yuan it will be like going back to square one. And now that we have news of Dangote getting loans in Yuan from same China, won't he have a sutiation were he can manipulate the rate in the black market like in the current dollar case?

StainlessH:
What's the direct immediate effect of the Yuan FX deal on importers from China.
Economics in the house help us with analysis. Thanks

there will be less demand for $ since most of our imports are from china

StainlessH:
CC: mathschic
Malton
Bevista

Thanks for the insight. I quite agree with Bevista about the opinion that if we don't have enough Yuan it will be like going back to square one. And now that we have news of Dangote getting loans in Yuan from same China, won't he have a sutiation were he can manipulate the rate in the black market like in the current dollar case?

Men it just crossed my mind about Dangote manipulating the yuan,

hopeforcharles:

Men it just crossed my mind about Dangote manipulating the yuan,

Why is he so fast to get the loan at this very time?

hopeforcharles:

Men it just crossed my mind about Dangote manipulating the yuan,

Why is he so fast to get the loan at this very time?