Although Nigeria is yet to ink the African Continental Free Trade Agreement (AfCFTA), a multibillion dollar booty is said to be awaiting the country if it does, particularly when the multilateral currency swap lines being championed by the Africa Export-Import Bank (Afreximbank) comes on stream.
Just last week, in far away Egypt, at the just-concluded Intra Africa Trade Fair (IATF), the bank said it was working on an arrangement that would enable countries trade and settle transactions costs without reference to external currencies.
According to its Director of Corporate Communications, Mr. Obi Emekekwue, Afreximbank is already working on the scheme that would enable African countries trade with one another without resorting to other convertible currencies like the almighty dollar, pound sterling, euro and the Chinese renminbi.
He disclosed that the bank had already commenced a test run of the scheme, which would be launched across the continent soon.
Although its modality is still in the wraps, it is a step in the right direction as the only game in town now is currency swap, particularly among continental brothers across the globe,. For instance, it was reported recently that the Asian tigers, Japan and China, the world’s second- and third-largest economies, are in talks to resume a currency swap arrangement between their central banks worth about 3 trillion yen (£21.3 billion).
Back home in Africa, the lack of such deal to facilitate urgent settlement of trade has been the albatross since time immemorial, which may eventually frustrate the dream of a common market under an AfCFTA regime, according to the Chairman of Vista Bank, Mr. Simon Tiemtore.
A report from IATF quoted Tiemtore as saying that currency issue remained a major challenge for the realisation of a unified African continental market, which all stakeholders, including the respective central banks, should resolve to achieve the goals of AfCFTA.
His words: “But trade among nations must continue while the governments take stronger policy actions to sort out these issues because the private sector cannot wait until this is done. Trade among African countries must continue while we look at Afreximbank and the central banks to put in place policies to resolve these issues.”
Ahmed Mansur, an Executive Director at Dangote Group, noted that some countries were already trying their hands on currency swaps option, stressing, however, what was needed among neighbouring countries to transact were trust and guarantees from the government using their local currencies.
Just last June, Mr. Bismarck Rewane, Chief Executive Officer, Financial Derivatives Limited, while making case for the Nigerian naira and South African rand swap deal said any type of deal between Nigeria and South Africa will be useful and will consolidate stronger position of trade between both countries.
“This swap will ease pressure on external reserves, enhance infrastructural development, create jobs and improve trade between the two countries especially when these two are yet to sign on AfCFTA, and the swap arrangement is also estimated to generate a region of $1 billion over three years.
“The swap arrangement will also enhance trade flows by at least 50 per cent to $4 billion, ease demand pressure on both currencies, narrow Nigeria-South Africa imbalance to less than $1 billion and companies which will play in retail, telecoms, power and entertainment sectors will be key beneficiaries of the arrangement,” he stated.
Rewane explained that Nigeria and South Africa both account for 37 per cent of Gross Domestic Product (GDP) and both have exported 59.3 per cent of total export and 58.2 per cent of total import between them.
Last July, President Emmanuel Macron of France, during his visit to Nigeria, also advocated for common currency in Africa saying, “I am a strong believer of ECOWAS and market access approach. You see, Nigeria is a big champion in ECOWAS.
A sizeable number of your neighbours have to work and make business in English.For you to work and make business in French, you have to make regional integration real.
I do believe in ECOWAS, free trade, free market, free regulation and much more integration. I am for regional integration. It is about time we went for more integration, market access and possibly a sort of common currency zone in the region.
“We have to change the rules, we have to accept this idea for a lot of countries’ integration in their own fashion. To achieve market access, you need stability; you need framework. What African Union signed in March in Kigali, to launch its own initiative for free trade, is a good one.”
The Economic Community of West African States (ECOWAS) has been making frantic efforts since 2003 to adopt a common currency.
Recently, the ECOWAS parliamentarians adopted a new strategy to make the single currency dream a reality. The new measure, according to a report, would examine the level of preparedness of each member state, discuss and determine the baseline macro-economic requirement and structural convergence for economic and monetary integration that will lead to actualisation of a common currency for financial transactions and trade facilitation in the sub-region, just like the euro zone.