- May 04, 2018
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How Currency Swap between Nigeria and China will affect Businesses in Nigeria
Nigeria has benefited a lot from its relationship with China over the years. Nigeria’s acceptance of the Chinese has promoted business dealings drastically especially since the new millennium. Nigeria has used more of China Civil Engineering Construction Corporation (CCECC) for much of its construction services across the states of Nigeria. Many roads and bridge projects in Lagos state are being managed by the Chinese company.
Most of the Electronics such as Televisions, Mini Hifi audio systems, DVD players, Blue Ray players, Home theatres, Hifi audio systems, Air-condition units, fans, extension boxes and more house hold appliances are being imported from China. Many of these products are used by Millions of Nigerians.
Nigerias’ large population is one of the Highest users of Chinese mobile phones as they are cheaper and deliver what a low-income earning Nigerian may need in a phone besides voice services. Other Companies like Huawei and Techno also produce high end smart phone which is also largely used by Nigerians.
Most of the car parts used in Nigerian for maintenance of vehicles are imported from China. Other power supply equipments like generator sets and solar panels are mostly imported from China.
In the Textile industry, some raw materials are also imported from China for producing clothing. Most fashion businesses in Nigeria are grateful for easy access to clothes, shoes and accessories imported from China.
Many cars on Nigerian roads like, Kia and Hyundai are also Chinese cars which are easy to maintain because of easy access to their parts and specialist mechanical engineers based in Nigeria. Beyond these Nigeria is looking forward to a stronger partnership and empowerment of bilateral relationship between the two countries. The currency swap between Nigeria and China will promote easy trade and availability of currencies to transact businesses between the two countries. The importance of a strong partnership with China cannot be overemphasized as even developed countries like United states and England still depend on them to keep their GDP and Economy in a progressive mode.
The currency Swap between the two countries will make Chinese products more affordable in Nigeria.
According to Xinhua, China’s Central Bank said on Thursday that it has inked a currency swap agreement with Nigeria.
The agreement will allow the two sides to swap a total of 15 billion Chinese yuan ($2.35 billion) for 720 billion Nigerian Naira, or vice versa, in the next three years, the People’s Bank of China (PBOC) said on its website.
The move is aimed at facilitating bilateral trade and investment and promoting the financial stability of both sides, the PBOC said. The deal can be extended by mutual consent.
A currency swap deal allows two institutions to exchange payments in one currency for equivalent amounts in the other to facilitate bilateral trade settlements and provide liquidity support to financial markets.
In 2014, the CBN’s deputy governor, Kingsley Moghalu, said the bank was looking to increase the percentage of Yuan foreign reserves in its possession from two per cent to seven per cent.
According to him, 85 per cent 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.
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.
Nigeria and the People's Republic of China established formal diplomatic relations on February 10, 1971. Relations between the two nations grew closer as a result of the international isolation and Western condemnation of Nigeria's military regimes (1970s-1998). Nigeria has since become an important source of oil and petroleum for China's rapidly growing economy and Nigeria is looking to China for help in achieving high economic growth; China has provided extensive economic, military and political support. Wiki reveals going down history lane.
In 2004 and again in 2006, Chinese President Hu Jintao made state visits to Nigeria and addressed a joint session of the National Assembly of Nigeria. Both nations signed a memorandum of understanding on establishing a strategic partnership. China has supported Nigeria's bid for a seat in the U.N. Security Council. As of February 2013, the Chinese Ambassador in Nigeria is Deng Boqing.
Although Nigeria maintains trade relations with Taiwan, and has a representative office in Taipei, it issued a joint communiqué with China in 2005, reaffirming that Beijing was "the only legitimate government representing the whole of China and Taiwan is an unalienable part of its territory".