As a way of finding solutions to the current currency slump in Nigeria, it will be recalled that the Industrial and Commercial Bank of China Ltd (ICBC) and Nigeria’s Central Bank signed a deal on Yuan transactions, creating a currency swap agreement with china. Before that agreement, many Nigerians have found it exceedingly difficult to pay for services like education and healthcare in other countries, due to the weak Naira, and this deal is an attempt to resuscitate the currency.
Reports came in that the director general of the African affairs department of China’s foreign ministry, Lin Songtian, said the deal meant the Yuan will flow freely around Nigerian banks and will even be included in the country’s foreign exchange reserves. The currency swap agreement with china was one of the outcomes of the meetings between Presidents Muhammadu Buhari of Nigeria and Xi Jinping of China, during the Nigeria-China Business/Investment Forum in Beijing, China. It is a fact that aside from the financial investments China has made in agriculture and infrastructure in Nigeria, the deal will provide a way for both countries to settle trade agreements in the Yuan, the official Chinese currency. It appears that President Buhari is determined to transform Nigeria into an exporting country as opposed to a primarily consuming one, saying it is high time the country started exporting to China as much as china exports to Nigeria.
Meanwhile, this is the not the first time Nigeria has made attempts to include the Yuan into its foreign exchange reserves. In 2011, under the governor of the Central Bank of Nigeria at the time, Sanusi Lamido Sanusi, a small percentage of the country’s foreign reserves were in the Chinese Yuan. At the time, Nigeria’s $32 billion in reserves were 79 percent in dollars with the rest largely held in Euros and Swiss francs. Then, Sanusi was cited as saying the decision came because the Nigerian financial sector had a lot of confidence in the Chinese currency. “Confidence in China doesn’t mean lack of confidence in America. Europe and America will continue to be important parts of the world. Having said that, it will be almost living in a dream world to ignore China. It’s the second-largest economy in the world and it’s well managed,” Sanusi was quoted to have said. Now, the question is, will the currency swap agreement with china help to shore up the Naira as intended by the president? The answer will lie on the decision African countries are trying to take, which will enable them dump the US Dollar as the prevailing currency in their foreign reserves. Since 2014, the world market has recognized 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.
Haven said all, the political implication of the currency swap agreement with china by African countries may be dare, it will be recalled that the ousted and assassinated Libyan leader, Muammar Qadhafi was assassinated for moves like this, it was said that he was pushing for an all African currency backed by gold. This move when implemented would threaten the stand of the US Dollar as the dominant world reserve currency. If Africa gravitates towards china as demonstrated now, what woes will it bring along to Africa?