President Buhari recently embarked on his one too many trips out of the country. This time he went to China. The outcome of the trip was that Nigeria's Central Bank and The Industrial and Commercial Bank of China Limited signed an agreement on Yuan transactions. The Chinese currency, Yuan will now be allowed to flow freely in Nigerian banks. It has also been included in our foreign exchange reserves.

What Does This Mean?

1. Our foreign exchange will no longer be in dollars alone. We will now earn in Yuan as well.
2. Naira can now be converted directly to Yuan instead of going through the long process of first converting to the expensive and unavailable dollars and then to Yaun. The exchange rate of Yuan to Naira presently stands at 30.74 NGN to 1 CNY.
3. Prices of imported goods will reduce since we import most of our products from China.
4. There would be a reduced demand for dollars.

What Is The Worst That Can Happen?

The bad side to this new development is that it keeps us as an import dependant nation. People would prefer to import from China rather than purchasing locally produced items due to the high cost of raw materials and so many other factors dettering local production. This move might also upset the US as they would see this as a threat to their status as the most powerful nation in the world. We all know it is not very advisable to be in bad terms with the US. Don't even think about going to ask them for any aids whatsoever. You're on your own.

Looking At The Bright Side

This is a good move by the President as it would help ease things in Nigeria. Meanwhile, it should only be used as a temporary solution else we become over dependent on the Yuan which will in turn lead to a rise in its demand and then the Chinese currency becomes too expensive. If this happens, we are back to square one! Hopefully, President Buhari will take this time to implement policies that will boost local production. First things first, electricity needs to be fixed. Imagine the weight it would take off local manufacturers if they don't have to buy fuel or diesel just to power their machines. Raw materials also need to be made readily available and cheaper too. If all of these are put in place, we might actually become the giant of Africa we have been erroneously referred to as.

Until then, I am keeping my fingers crossed for Nigeria and watching as things play out.

Source: http://strippedmind.com/2016/04/14/as-nigeria-signs-foreign-exchange-deal-with-china/