…Urges CBN to provide details of currency deal
Uche Usim, Abuja
The Dean of Banking & Finance Department, Nasarawa State University, Keffi, Prof. Uche Uwaleke, has called on the Central Bank of Nigeria (CBN) to supply details of its recent currency swap deal with the Industrial and Commercial Bank of China (ICBC) to enable Nigrians assess the real implications of the deal.
Reacting to the currency deal executed by Nigeria with Chinese bank last week, Uwaleke noted that critical aspects of a swap line such as size, duration, effective date and cost were not made public by the apex bank.
He then urged the CBN to communicate details of the deal especially given the fact that the agreement was signed with ICBC and not the Chinese PBoC. These details should be uploaded on CBN’s website as soon as the deal is consummated to enable a thorough analysis of its costs and benefits to Nigeria.
With Chinese exports accounting for about 80 per cent of the total bilateral trade volumes, it has been argued in some quarters that Nigeria does not stand to reap commensurate benefits from the deal given the large trade imbalance in favour of China.
The “flooding” of Nigerian markets with cheap Chinese goods has adversely affected domestic industries, especially the textiles sector. The currency deal, the argument further goes, would only reinforce Nigeria’s position as a dumping ground for goods from China and could rubbish the import-substitution efforts of the Federal Government.
According to him, those opposed to the deal also contend that it was rather hasty to accumulate a substantial proportion of the country’s foreign reserves in Chinese currency in view of the volatility associated with the yuan and the fact that it is not yet an international reserve currency. “Nonetheless, it is pertinent to observe that asymmetric trade in favour of China can be tackled within the framework of the agreement.
This much was not lost on President Buhari when he urged the business community in China not to “see Nigeria as a consumer market alone but as an investment destination where goods can be manufactured and consumed locally.” He said Worthy of note also is the fact that the yuan is on its way to becoming an international reserve currency.
In November 2015, Christine Lagarde, the Managing Director of the International Monetary Fund (IMF), had announced that China’s renminbi would become a world reserve currency alongside the dollar, euro, pound sterling and yen with effect from September 2016.
This would pave the way for broader use of the renminbi in trade and finance, securing China’s standing as a global economic power. The Chinese currency is already one of the top-10 most traded international currencies according to a recent report by the Bank for International Settlements.
It is safe to conclude that the swap arrangement is being established in the context of the rapidly growing bilateral trade between China and Nigeria.
According to a recent CBN report, “business and trade relations between Nigeria and China have grown astronomically in the last decade with bilateral trade volumes rising from $2.8 billion in 2005 to $14.9 billion in 2015.”
Nigeria accounted for 8.3 per cent of the total trade volume between China and Africa and 42 per cent of the total trade volume between China and the Economic Community of West African States (ECOWAS) countries in 2015.”