Nigeria's central bank has added the equivalent of $500 million in Chinese yuan to its reserves and plans to buy seven times that amount, in a shift that underscores booming commerce between China and the African continent.

http://online.wsj.com/article/SB10001424052970203986604577257190163679120.html?mod=googlenews_wsj

Great move!! SLS finally come to his senses, still a lot of manoeuvres to be made with his monetary policies but a good start. In the next 25 years or so, I believe the Yuan will be the world's reserve currency. The earlier we align ourselves with it, the better.

It seems countries are dumping the dollar for yuan and gold.

another slavery move

Im for invest in sharia yuan, Abeg nack me better story

jerseyboy:

silly guys. Chinese dont want their currency to appreciate.

the only sensible comment here! it's not news that china deliberately devalues it's yuan. the more the currencies of the world gain against the yuan, the more the chinese rake in from their exports. a simple principle that's not going away anytime soon.

but of course, lamido sabi pass me. so if him like, make him invest in the zimbabwean dollar.

jerseyboy:

silly guys. Chinese dont want their currency to appreciate.

PERFECT, YOU GOT THE ANSWER  --- You beat me to it

Good ok move for now but dangerous because anytime that China devalues their currency, what the f/uck do people think will happen to our reserve?

When I say SLS is clueless and needs to keep current on news, it will look as if I hate the fellow, but here he is, about to execute a not-so-good move (10x greater).

But wait o. I thought america is pressurising china to DEVALUE yuan. Because i am lost here o.

The move is irrelevant because the yuan is based on the dollar so its the same as keeping your money in dollars. The only benefit is that the yuan is under valued so whenever it finds it's real value you'll gain a few more dollars but by moving to the yuan you're still saving in dollars cause the Chinese save in dollars. If it was Swiss francs or gold then that'll be a different story

skullbaba:

But wait o. I thought america is pressurising china to DEVALUE yuan. Because i am lost here o.

NO to your question but YES in relation to the question.

America has been accusing China of Currency Devaluation, and as of last year, there was a bill in Congress that will place certain ban on Chinese export to America because it places unfair trade advantage to China. China has felt threatened and have said they will petition the WTO, meanwhile they have appealed to Congress not to go ahead with this bill. I did not follow-up on this bill, but I'm almost certain that this bill is very much active in Congress. Should this bill be introduced, ain't no telling that China will take a might hit on their economy.

manny4life:


PERFECT, YOU GOT THE ANSWER  --- You beat me to it

Good ok move for now but dangerous because anytime that China devalues their currency, what the f/uck do people think will happen to our reserve?

When I say SLS is clueless and needs to keep current on news, it will look as if I hate the fellow, but here he is, about to execute a not-so-good move (10x greater).

This is a welcome development and a great move.

1. Chinese Yuan economic fundamentals is at an all time high, considering their continuous growth in GDP, continuous Positive Balance of payment and Current Account Surplus.

2. The Chinese population is the highest in the world. Imagine what will happen to their currency when their middle class starts to consume more of their manufactured products, this has started already and will continue.  This scenario can only appreciate their currency will not depreciate it.

3. The political pressure from the West. The pressure is to force China to revalue its currency, so that Chinese economy can lose its competitive advantage. Eventually this is going to happen; it’s just a matter of time. When it does happen, the currency has only one direction to go which is up.

4. Floatation of Chinese Yuan and loosening economic policy and regulation. The general expectation is that for any economy to be considered a superpower, it has to abide by the floating currency mentality. In order for the Chinese government to continue to enjoy the benefits of Super Power; they have to float their currency and loosing the tightening grip they have on their economic policy. Also, considering the speculation that Yuan can/might replace $US as a reserve currency for global oil trading.  Eventually this is going to happen, and when it happens, it will appreciate the currency.

In my opinion, the conservative risk appetite for holding Chinese Yuan is in the band of - 5% to +30%. This is better than what you can say for $US, Euro, pounds, and other favourable currency considering their risk profile.

Best move ever! The Yuan will one day touch 4.5yuan to the dollar.

Best move!

What's Chiness Yuan?

China is the largest holder of US treasury bills yet they continually devalue their currency to encourage exports

The truth is that the move is a good investment strategy in 'theory', i.e.  if Nigeria has some sort of relevance in international trade finance. Unfortunately, our great country doesn't,we are just a dumping ground so the decision will not in any way add any real value to our external reserves in the long term.

I would suggest investment in 'gold bullion' as a good 'hedging' strategy

God bless Nigeria!

courage89:

This is a welcome development and a great move.

1. Chinese Yuan economic fundamentals is at an all time high, considering their continuous growth in GDP, continuous Positive Balance of payment and Current Account Surplus.

2. The Chinese population is the highest in the world. Imagine what will happen to their currency when their middle class starts to consume more of their manufactured products, this has started already and will continue.  This scenario can only appreciate their currency will not depreciate it.

3. The political pressure from the West. The pressure is to force China to devalue its currency, so that Chinese economy can lose its competitive advantage. Eventually this is going to happen; it’s just a matter of time. When it does happen, the currency has only one direction to go which is up.

4. Floatation of Chinese Yuan and loosening economic policy and regulation. The general expectation is that for any economy to be considered a superpower, it has to abide by the floating currency mentality. In order for the Chinese government to continue to enjoy the benefits of Super Power; they have to float their currency and loosing the tightening grip they have on their economic policy. Also, considering the speculation that Yuan can/might replace $US as a reserve currency for global oil trading.  Eventually this is going to happen, and when it happens, it will appreciate the currency.

In my opinion, the conservative risk appetite for holding Chinese Yuan is in the band of - 5% to +30%. This is better than what you can say for $US, Euro, pounds, and other favourable currency considering their risk profile.

Unfortunately, while I do see this as an "OK move" according to my quote BUT dangerous in the long run.

1. There is no doubt that the Chinese Economy has been experiencing growth, GDP on the rise, more exports than imports resulting to trade surplus, increased in their reserve et al, however, all these are obvious, but that isn't my point. My issue with this is that moving more than $5billion (10x of $500million), about 15.6% of our reserve into a currency that often devalues all the time isn't the smartest thing to do.

2. No doubt that their population is the indeed the highest, however, with regards to their population vs per capita, this is "really low" compared to other nations. Besides, their middles class are able to consume more (but what % is the question)? In addition to that, while their currency appreciates, that's the whole point, CHINA DOESN'T WANT THEIR CURRENCY APPRECIATING. Economist have suggested (according to reports to Congress) that China pegs it's under value at 40% of it's real value and will CONTINUE to do so in order to gain trade advantage.

3. The pressure from the West - United States and Europe is NOT pressuring China to "devalue" it currency (wouldn't that be giving them more hand), the reverse is the case, in fact they want it higher valued, in addition,  however, they have argued that China needs to allow its currency to flow freely based on market demands which will make their currency appreciate, thus, making the purchase of goods and services slightly higher and will more likely reduce China's export.  

4. I still think that you're missing the point; no one is arguing whether the Yuan will appreciate, economic indices predict that the currency will rise, however, for China to be more competitive and gain trade advantage, economic trade nations have argued that it "undervalues" it currency. I am not arguing whether it's appreciating, I know it's appreciating, my point is, Chinese Government will continue to undervalue its currency to stay competitive.

Like Congress had put on hold their bill, should this go into effect, you would see a trade war between the West and China, something I don't think China's economy can withstand because about 1/3rd of Chinese export is into the U.S., while a double-digit is to other Europe nations. Again, my point is why do you hold reserve in a country currency you know fully well that they intentionally "undervalue" their currency?

2. The Chinese population is the highest in the world. Imagine what will happen to their currency when their middle class starts to consume more of their manufactured products, this has started already and will continue.  This scenario can only appreciate their currency will not depreciate it.

I disagree.  An increase in consumption which cannot be matched by a corresponding increase in supply will always be followed by a demand pull inflation.  Chinese government has been struggling with this for some time, and i'm yet to find anywhere inflation causes an appreciation in the value of a currency.

3. The political pressure from the West. The pressure is to force China to devalue its currency, so that Chinese economy can lose its competitive advantage. Eventually this is going to happen; it’s just a matter of time. When it does happen, the currency has only one direction to go which is up.

We don't know this will happen any time soon for certain.  Let's even say China revalues it's currency by 10% over the next two years, that will only give you a 5% per annum return, i doubt if this is very interesting considering this may very well be achieved by investing in several alternative asset classes.

4. Floatation of Chinese Yuan and loosening economic policy and regulation. The general expectation is that for any economy to be considered a superpower, it has to abide by the floating currency mentality. In order for the Chinese government to continue to enjoy the benefits of Super Power; they have to float their currency and loosing the tightening grip they have on their economic policy. Also, considering the speculation that Yuan can/might replace $US as a reserve currency for global oil trading.  Eventually this is going to happen, and when it happens, it will appreciate the currency.

You really think China is happy to give up the control of its currency?  You really think China is willing to let the value of its currency be determined by free markets in the place of a government fiat?  

If there's anything we already know about China, it is the fact that it hates to give up control, not especially when wall street major traders  like Goldman Sachs can turn what has been in China's sights a "cherished resource" into a poker game for gambling and betting.  I also doubt that the yuan is about to replace the dollars anytime soon.  why would it?  If you consider the global exposure to the dollars, including exposures from pension funds, and major investment houses, it will be a bit unrealistic to assume anyone is just willing to ditch dealing in a unit whose fundamentals they've known all their life.

In my opinion, the conservative risk appetite for holding Chinese Yuan is in the band of - 5% to +30%. This is better than what you can say for $US, Euro, pounds, and other favourable currency considering their risk profile.

i doubt if the risk appetite contained in the Chinese Yuan can be totally described as conservative.  if the yuan floats tommorow, it faces the immediate prospects of liquidity risk and information inefficiency.  You just can't tell what the chinese government is planning to do, why the hell will someone be willing to hold their life savings in the Yuan?

Its not only about investing in d Yuan. Its about investing in d Chinese economy which is actually d biggest economy (forget d US and der propaganda) presently and i believe will continue to be in d next 50yrs.
Any country that neglets d Chinese economy now. Na dm sabi!
D other economy that shouldnt be negleted is d Brazilian economy (just check dm out 2yrs after hosting d world cup).

N1.3tr fuel subsidy ko
chinese yuan ni
kano govt N100M donation bo
N25M madalla bomb blast ti

manny4life:


Unfortunately, while I do see this as an "OK move" according to my quote BUT dangerous in the long run.

1. There is no doubt that the Chinese Economy has been experiencing growth, GDP on the rise, more exports than imports resulting to trade surplus, increased in their reserve et al, however, all these are obvious, but that isn't my point. My issue with this is that moving more than $5billion (10x of $500million), about 15.6% of our reserve into a currency that often devalues all the time isn't the smartest thing to do.

2. No doubt that their population is the indeed the highest, however, with regards to their population vs per capita, this is "really low" compared to other nations. Besides, their middles class are able to consume more (but what % is the question)? In addition to that, while their currency appreciates, that's the whole point, CHINA DOESN'T WANT THEIR CURRENCY APPRECIATING. Economist have suggested (according to reports to Congress) that China pegs it's under value at 40% of it's real value and will CONTINUE to do so in order to gain trade advantage.

3. The pressure from the West - United States and Europe is NOT pressuring China to "devalue" it currency (wouldn't that be giving them more hand), the reverse is the case, in fact they want it higher valued, in addition,  however, they have argued that China needs to allow its currency to flow freely based on market demands which will make their currency appreciate, thus, making the purchase of goods and services slightly higher and will more likely reduce China's export.  

4. I still think that you're missing the point; no one is arguing whether the Yuan will appreciate, economic indices predict that the currency will rise, however, for China to be more competitive and gain trade advantage, economic trade nations have argued that it "undervalues" it currency. I am not arguing whether it's appreciating, I know it's appreciating, my point is, Chinese Government will continue to undervalue its currency to stay competitive.

Like Congress had put on hold their bill, should this go into effect, you would see a trade war between the West and China, something I don't think China's economy can withstand because about 1/3rd of Chinese export is into the U.S., while a double-digit is to other Europe nations. Again, my point is why do you hold reserve in a country currency you know fully well that they intentionally "undervalue" their currency?

Kudos to you. All very valid point. And to add more

- The Chinese govt can never be trusted to act fairly and will continue to resist calls to allow her currency appreciate. Why place our reserves in the hands of a govt that can change the rule and refuse to adhere to market forces

- Most of our oil export goes to the U.S, so it makes sense to hold reserves in dollar. What exactly to we export to China? nothing. Yes, we import stuff from China but doesn't mean we have to hold Yuan (Renminbi)

- China holds over $1.4 trillion in U.S treasury bill; an indication of total confidence in the dollar. And despite the S & P downgrade, demand for U.S. Treasury bills has not abated. Yet out learned Mallam thinks flocking to Yuan reserve is a smart move.

From the post, i understand that we are not proposing to hold all  our reserve in Chinese  yuan. The post states $ 500 Million to be invested in Chinese yuan and this amount will be increased  seven times in the future. When we add up these figures , we will have about $4 billion worth of yuan in our foreign reserve . Add this $4 billion  to the present $ 34 billion(as at yesterday )  we have as foreign reserve and this will amount to $ 38 billion worth of foreign reserve centris   paribus. Thus, the percentage of Chinese yuan in the portfolio of currencies in our foreign reserve is 10.53. This percentage is fair  considering the position of China in the global economy and the proposed ties between the Nigerian govt and Chinese govt being consummated few days ago. I really expected this move.  
Now this is my point. Diversifying the portfolio of currencies in our foreign reserve is not a bad idea. In a layman's language, one ( in this case countries) should not put all her eggs ( in this case, foreign reserve currencies)  in one basket ( ie one currency) . I hope you got my point.

the chinese dont want their currency to appreciate.and this is a headache to the us.it may appreciate in the future.but not significantly.

I personally feel its a bit hasty. They should have waited to see if there is any chance the yuan will be allowed to float before pulling the trigger, however I can understand why we should be fleeing the dollar because quite frankly I cannot see anything beyond gloom about the US economy. They will never be able to contain their deficit in decades to come and they have a couple of massive, money burning wars to come. The dollar is clearly in a long term decline. Gold on the other hand is also a no no. Far too high for the reserve pot at today's prices. One minor adjustment and the bubble disintegrates, another legacy of the shaky dollar.

yelanst:

From the post, i understand that we are not proposing to hold all  our reserve in Chinese  yuan. The post states $ 500 Million to be invested in Chinese yuan and this amount will be increased  seven times in the future. When we add up these figures , we will have about $4 billion worth of yuan in our foreign reserve . Add this $4 billion  to the present $ 34 billion(as at yesterday )  we have as foreign reserve and this will amount to $ 38 billion worth of foreign reserve centris   paribus. Thus, the percentage of Chinese yuan in the portfolio of currencies in our foreign reserve is 10.53. This percentage is fair  considering the position of China in the global economy and the proposed ties between the Nigerian govt and Chinese govt being consummated few days ago. I really expected this move.  
Now this is my point. Diversifying the portfolio of currencies in our foreign reserve is not a bad idea. In a layman's language, one ( in this case countries) should not put all her eggs ( in this case, foreign reserve currencies)  in one basket ( ie one currency) . I hope you got my point. 

No offense brother, but seriously, however you came up with your calculation is grossly flawed. We adding extra 7x of $500 million is from our "current reserve movement" of the $34billion (which experiences slight changes) annually, thus, $3.5billion of whatever the future average % change in the reserve movement in the future You assuming we have a $38billion reserve is a wrong. Oh btw, use FV for compounded years. Keep in mind that our movement in reserve has been forever slow, having taken a look at the reserve figure from CBN's website, I'm more liberal to put it that our reserve moves at an average of 1.5% annually.

In my own calculation, assuming a "five years term" into the FV,

FV = 34(1+i)n

FV = 34(1+0.015)5

FV = 34(1+0.015)5 = (1.0773)

FV = 34(1.0773) = 36.63.

Now that you have this value, it's more likely that since SLS is proposing to move $3.5billion (9.56%) assuming over 5years, keep in mind that inflation and exchange rate hasn't been accounted for, given that China devalues their currency by even at 10% at every year just to be competitive (I just want to be conservative), for every year, Nigeria will lose an average of $350million each time the currency is undervalued although it's bound to gain value "over time", but pretty much, that time is lost investment(keep in mind that many important factors weren't accounted for). Perhaps, my assumptions could be off and calculation off, but I welcome opinions.

You can always predict that CBN dictator. His speculation of investing in Yuan is lack of foresight. The Chinese economy is still fragile because it depends largely on the American and the European import for survival. As the American and European economies retracted from the financial crisis,when deficit and other trade balances are remitted to the Chinese they would face inflation leading to reduction in production and supply and increase in cost.

Can't Nigeria be China or US? We not invest all these money in our economy and create jobs?

I am not an economist and I might not fully understand market forces and the full interplay among foreign exchanges, but as a layman, one thing I know is that the value of our exports to the US is far greater than the value to China and I don't personally feel it's a nice move because even if the Yuan appreciates, we ain't exporting goods to China and I don't see the Yuan appreciation accruing additional income to our economy. Also, there has always been a latent and cold diplomatic rivalry between the US and China and the Chinese government is well aware of that fact and as a result might not be overtly pressured into revaluing her currency. Equally, we cannot really trust the Chinese government as we are not sure of their long term motive.

@ manny4life,
sir, i did not intend to go into the vagaries of reserve speculation/ calculation.I was just trying to point out some thing in a more simplified model that will be comprehensible to a layman. Thats is, the need to diversify some of our foreign reserve into yuan bearing in mind the proposed ties between the FG and China. Having some of your reserve in the currency of a country which we propose to do business with is not a bad idea.

occam:

Kudos to you. All very valid point. And to add more

- The Chinese govt can never be trusted to act fairly and will continue to resist calls to allow her currency appreciate. Why place our reserves in the hands of a govt that can change the rule and refuse to adhere to market forces   

- Most of our oil export goes to the U.S, so it makes sense to hold reserves in dollar. What exactly to we export to China? nothing. Yes, we import stuff from China but doesn't mean we have to hold Yuan (Renminbi)

- China holds over $1.4 trillion in U.S treasury bill; an indication of total confidence in the dollar. And despite the S & P downgrade, demand for U.S. Treasury bills has not abated. Yet out learned Mallam thinks flocking to Yuan reserve is a smart move.

You're quite right with regards to our trade partners, but in the next 10 years there will be a shift of economic power to the far east- whether anyone believes it or not is still to be debated. Quantitative easing in America and the Euro-zone make them a lot less attractive to invest in- the currencies in this zone is being devalued not artificially like China but due to structural debt issues- this is far more worrying than artificial inflation in China because we still can't see the light at the end of that tunnel. I believe we are still yet to see the worst of it, wait till Obama wins re-election then we can see.

China on the other hand, have been devaluing their currency for some time now, the Chinese have decided flood the markets with their currency until the currency has the same parity as other currencies- then the handbrakes come off and they let Yuan appreciate gradually because in the long run it would increase the purchasing power of Chinese consumers.

In the short term, there isn't much benefit to Nigeria except that we align ourselves and think about the future (why do you think David Cameron could care less if the UK was in the EU or not? Hint). The long term (15-25 years) is where we could definitely cash in on this policy- because the Yuan WILL appreciate considerably higher than any other major currency and our trade aggregate with the Chinese will also increase.

We can't wait for the currency to appreciate before we move, it'll be too expensive and returns will be lower. The move just underlines that things ain't business as usual any more with the "super powers".

By Kerri Shannon, Associate Editor, Money Morning
China has started diversifying away from the U.S. dollar, yet another sign that it's time to invest in the yuan.

A report from Standard Chartered Bank last week showed China's foreign exchange reserves expanded by $196 billion in the first four months of this year. About 75% of that investment was in non-U.S. dollar assets.

This is the biggest gap between accumulated reserves and purchased U.S. debt by China in at least five years.

As the dollar's value weakens, China has taken steps to distance itself from the currency, and attempted to strengthen its own by investing more in gold and other assets.

Money Morning Chief Investment Strategist Keith Fitz-Gerald said China's diversification means the yuan is backed by better assets than other countries' currencies.

"That is why the yuan is likely to emerge as a new reserve currency, and yet another argument for owning the yuan as an investment," said Fitz-Gerald. "This is the full circle nobody expects and one of the reasons I frequently refer to China's yuan as the only currency on the planet with adult supervision."

Japan's plan to buy Chinese government bonds worth up to $10 billion (780 billion yen) is expected to help China's bid to promote the yuan's international use
Ride on SLS.

Nigerians are dying of hunger,poverty rates is growing,fuel price has gone from N97 to N150 a liter and yet SLS is investing $500m on a strategy that experts still don't see happening in 40 years from now.
We need to first profer short term solutions to our problems by creating jobs,improve the transport system in the country,regulate price and put our refineries back on track then think of what will happen to the Yuan in 25/40 years from now.

How come we are the only one taking this hasty decision when there are so many pressing issues that needs $500m intervention? SLS is clueless and a charlatan who feels he knows it all and fail to analyzed situations based on negative and positive effects,he only see positives which is almost impossible in today's world.