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What You Need To Know About The Currency Swap Agreement Between Nigeria/china - Business - Nairaland

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What You Need To Know About The Currency Swap Agreement Between Nigeria/china by FWJOBSNG: 5:28pm On Apr 13, 2016
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/

18 Likes 6 Shares

Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by Luckylife(m): 5:29pm On Apr 13, 2016
Ok

1 Like

Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by saintopus(m): 5:58pm On Apr 13, 2016
Convert all the reserve to Yuan and see the miracle of the naira gaining value

21 Likes 2 Shares

Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by Judeoxide(m): 6:04pm On Apr 13, 2016
Interesting

1 Like

Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by omowolewa: 6:05pm On Apr 13, 2016
Is okay

1 Like

Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by chiomzy86(f): 7:40pm On Apr 13, 2016
Good..
Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by Nobody: 7:59pm On Apr 13, 2016
Who dem epp?

6 Likes

Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by 69MissedCalls(m): 8:36pm On Apr 13, 2016
i can bet 1 million Yuan. naira can never have value again.

16 Likes 1 Share

Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by IykeWest: 8:36pm On Apr 13, 2016
What?
Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by abumeinben(m): 8:37pm On Apr 13, 2016
shocked

Hope Yuan isn't about to colonise the Naira?

5 Likes

Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by englishmart(m): 8:37pm On Apr 13, 2016
maybe China will adopt naira while we adopt yuan

Lubbicious rubbish

26 Likes 3 Shares

Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by MathsChic(f): 8:37pm On Apr 13, 2016
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.

216 Likes 16 Shares

Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by timilehin007(m): 8:37pm On Apr 13, 2016
This will epp...

10 Likes 1 Share

Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by edlion57(m): 8:37pm On Apr 13, 2016
V
Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by simongonner: 8:38pm On Apr 13, 2016
noted

1 Like

Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by Cmoyor: 8:38pm On Apr 13, 2016
hmmmmm
Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by bakry86: 8:38pm On Apr 13, 2016
good
Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by xtervaganza(m): 8:38pm On Apr 13, 2016
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

33 Likes 2 Shares

Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by Kreamie(m): 8:38pm On Apr 13, 2016
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

36 Likes 6 Shares

Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by Sunnycliff(m): 8:40pm On Apr 13, 2016
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

8 Likes 1 Share

Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by stolenstone: 8:40pm On Apr 13, 2016
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!

6 Likes

Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by culcid(m): 8:40pm On Apr 13, 2016
Till my payments on Chinese ecomerce sites calculated in Yuan, they are just speaking grammer.

12 Likes 1 Share

Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by Aminat508(f): 8:40pm On Apr 13, 2016
Hmmmm
Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by 735i(m): 8:40pm On Apr 13, 2016
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

22 Likes 2 Shares

Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by Olusharp(m): 8:40pm On Apr 13, 2016
....Time to start importing from China... Alibaba all the way...
Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by ramdris(m): 8:40pm On Apr 13, 2016
Analysis not too clear bt op try...

1 Like 1 Share

Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by xtervaganza(m): 8:42pm On Apr 13, 2016
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?

21 Likes 1 Share

Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by Nobody: 8:42pm On Apr 13, 2016
Good development
Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by donklint86: 8:42pm On Apr 13, 2016
Good
Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by Mopolchi: 8:42pm On Apr 13, 2016
Analysis remains unclear as regards the swap

2 Likes 1 Share

Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by Truth234(m): 8:42pm On Apr 13, 2016
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.

19 Likes 5 Shares

Re: What You Need To Know About The Currency Swap Agreement Between Nigeria/china by pendusky(m): 8:42pm On Apr 13, 2016
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?

9 Likes

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