A sign of growing Chinese presence in Nigeria and Africa
It was just a matter of time before Chinese currency Yuan will join the
family of currencies traded in Nigeria’s foreign exchange market.
Therefore it was no surprise when Nigeria's central bank made it official
that Chinese Yuan has been included “to a list of currencies that can be
used for trade settlement in the domestic foreign exchange market as trade
flows with Beijing increase.”
Chinese Yuan will join other 13 currencies including the U.S. dollar,
Euro, British Pound and Japanese Yen that are traded in Nigeria’s domestic
foreign exchange market. Many other countries including Russia, Turkey,
South Africa's Standard Bank and now Nigeria are offering Yuan for
bilateral exchange and trade in their local respective markets.
Apart from China’s encouragement to trading partners to employ the use of
Yuan for trade transactions and settlements in the local exchange market;
it does make sense at this point in time for Nigeria to make the strategic
move of expanding the number of currencies in the domestic exchange market
with latest inclusion of Yuan. For China has become a major trading
partner with Nigeria, the second largest economy in Africa.
China growing bilateral relationship with Nigeria is progressively
stronger, a testament to a successful strategic partnership. The
increasing level of trade and investments between the countries are
growing tremendously. According to Chinese Ambassador to Nigeria H.E Mr.
Deng Boqing, “The volume of trade between Nigeria and China recorded a
significant improvement, rising by 41.8 per cent to N540 billion ($3.67
billion) in the first half of 2010. The trade volume between the two
countries grew by nearly 300 per cent since 2004 and reached the peak of
$7.2 billion in 2008.”
China with over $2 trillion foreign reserve is making her presence felt
heavily in Nigeria. The flowing in of Chinese money and investments in
Nigeria is staggering, if not mind bugling. Short while ago, China signed
a $23 billion ‘sunshine deal’ to build four major oil refineries in
Nigeria. While in July of 2010 China also signed another business deal to
build $6 billion oil refinery in Lagos. It was also recorded that China
direct investments in Nigeria has exceeded $7 billion and China is also
committing $20 billion investments on Nigeria’s infrastructures. Recently
China Export-Import Bank signed $900 million loan with Nigeria.
China is a significant player in Nigeria’s economic landscape with the
numerous investments and deals in the country; she has garnered a great
deal of respect in Nigeria. China has truly proven to herself and to
Nigeria that she is committed partner in country’s development for a long
term. In return China needs natural resources especially oil from the
oil-rich Nigeria for fueling her economic expansion and feeding the
mountainous appetite of her local industries.
With level of China’s contributions to Nigeria’s bulging economy, it is
not really a big deal after all for Nigeria to trade Chinese Yuan in the
domestic foreign exchange market.
On part of China there will be a growing confidence of their presence in
Africa and Nigeria in particular. China can flex its financial and
economic power in Nigeria and the admission of Chinese Yuan in domestic
currency market shows that China is a significant player in Africa.
Although the presence of Yuan and other currencies in Nigeria’s market
will decrease the demanding pressure on dollar, the principal trading
currency in the market.
The point must be that dollar will not be displaced in the market by any
other currency in the Nigeria’s domestic foreign exchange market. Dollar
continues to be the dominant currency due to its value, universal
acceptance and in its surging demand by the local banks and business
community of Nigeria.
The volume of Yuan at initial stage maybe small, but progressively it will
get bigger because the presence of China with regards to trade and
investments will drive the demand for Yuan. The Nigerian local business
communities are grateful of the arrival of Yuan in the market for they do
not have to buy other currency first and convert it to Yuan later.
Chinese Yuan presence in the baskets of currencies used for transactions
in the local African markets will continue to increase. The massive
economic presence of China in Nigeria will continue to mature and enhance
as Nigeria leverage the economic bilateral relationship with China to
develop her economy.
Emeka Chiakwelu is the principal Policy Strategist at Afripol. Africa
Political and Economic Strategic Center (Afripol) is foremost a public
policy center whose fundamental objective is to broaden the parameters of
public policy debates in Africa. To advocate, promote and encourage free
enterprise, democracy, sustainable green environment, human rights,
conflict resolutions, transparency and probity in Africa.