As a way of finding solutions to the current currency slump in Nigeria, the Industrial and Commercial Bank of China Ltd (ICBC) and Nigeria’s Central Bank have signed a deal on Yuan transactions. Recently, many Nigerians have found it exceedingly difficult to pay for services like education and healthcare in other countries, due to the weak Naira, and this deal is an attempt to resuscitate the currency.

Reuters reports that the director general of the African affairs department of China’s foreign ministry, Lin Songtian, said the deal meant the Yuan will flow freely around Nigerian banks and will even be included in the country’s foreign exchange reserves. This deal is one of the outcomes of the meetings between Presidents Muhammadu Buhari of Nigeria and Xi Jinping of China, during the Nigeria-China Business/Investment Forum in Beijing, China.

Aside from the financial investments China has made in agriculture and infrastructure in Nigeria, the deal will provide a way for both countries to settle trade agreements in the Yuan. It appears that President Buhari is determined to transform Nigeria into an exporting country as opposed to a primarily consuming one, saying it is high time the country started exporting to China.

However, this is the not the first time Nigeria has made attempts to include the Yuan into its foreign exchange reserves.

In 2011, under the governor of the Central Bank of Nigeria at the time, Sanusi Lamido Sanusi, a small percentage of the country’s foreign reserves were in the Chinese Yuan. At the time, Nigeria’s $32 billion in reserves were 79 percent in dollars with the rest largely held in Euros and Swiss francs.

Bloomberg reports that Sanusi was cited saying the decision came because the Nigerian financial sector had a lot of confidence in the Chinese currency. “Confidence in China doesn’t mean lack of confidence in America. Europe and America will continue to be important parts of the world. Having said that, it will be almost living in a dream world to ignore China. It’s the second-largest economy in the world and it’s well managed,” Sanusi said.

In 2014, Central Bank’s deputy governor, Kingsley Moghalu, said the bank was looking to increase the percentage of Yuan foreign reserves in its possession from 2 percent to 7 percent. According to him, 85 percent of its foreign reserves were in dollars and it needed to have more in Chinese Yuan, as the country was taking a more important place in global trade. “It was clear to us that the future of international economics and trade will shift in large part to business with and by China. Ultimately the renminbi (Yuan) is likely to become a global convertible currency,” Moghalu said.

Now, the question is, will this integration of the Yuan help to shore up the Naira as intended by the president? The answer lies in the tentative decision that African countries are taking to dump the US Dollar as the prevailing currency in their foreign reserves. Since 2014, the world market has recognised the Yuan as a likely global reserve currency, a replacement for the dollar, which has led countries like Ghana, South Africa and Zimbabwe to integrate the renminbi (Yuan) into their financial markets. As a result of this, trade (however imbalanced) has increased between certain countries on the continent and China, as well as providing a fertile ground for demand for the currency on the continent.

http://www.financialwatchngr.com/2016/04/13/need-know-currency-swap-agreement-nigeria-china/

Ok

Convert all the reserve to Yuan and see the miracle of the naira gaining value

Interesting

Is okay

Good..

Who dem epp?

i can bet 1 million Yuan. naira can never have value again.

What?

Hope Yuan isn't about to colonise the Naira?

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.

This will epp...

V

noted

hmmmmm

good

It's the best move from this government IMHO if you consider most of our imported goods are from China.



We make more trade with China than any other country at present

Official rate is 32naira to 1Yuan

Parallel market is 68naira to 1Yuan



What does this tell you? The freaking parallel market has to be scrapped else all these na waste

saintopus:
Convert all the reserve to Yuan and see the miracle of the naira gaining value

What a myopic thought! Is Yuan the international standard for currency exchange and measurements

Biko Economics majors in the house, Is there no side effect of Nigeria's attempt at dumping the dollars for the Yuan?? Pls educate us!

Till my payments on Chinese ecomerce sites calculated in Yuan, they are just speaking grammer.

Hmmmm

The core issue we need to address is an overall balance of trade deficit ....
We need to export more...
China will use this opportunity to dump their goods in Nigeria...
Because China has comparative trade advantage in the production of almost all the goods which both countries will be exchanging...
At the end... we're still worse off

....Time to start importing from China... Alibaba all the way...

Analysis not too clear bt op try...

MathsChic:
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.

can I give you a hug?

Good development

Good

Analysis remains unclear as regards the swap

Hope they know China Yuan is unreliable, because of China spontaneous devaluation to boost exports whenever the Yuan is appreciating against the dollar.

Since Russia accepted Yuan as part of her reserves investors have reportedly lost over 30% of their savings in Yuan because of constant devaluation by the People's Bank of China.

China is known for one thing doctoring all economic data to attract investors, if anyone will do business of this capacity with China, its not during this period that China equity market has lost over $4 trillion dollars in value and have constantly been accused of unethical practices to make her market attractive.

Counting down to 2019...


When you know its


2 years
11 months
1 day
4 hours

to next Election

Kai Is this how we go dey?