By Ololade Julianah, Lagos
The plan by the Federal Government to increase availability of the Chinese Yuan and make it a recognisable foreign exchange and include it in the country’s foreign exchange reserve is already favouring the naira against the dollar in the parallel market.
As at Sunday afternoon, the naira gained between N12 and N15 at the parallel market as a dollar now exchange for between N305 and N307 in major cities like Abuja, Lagos, Port Harcourt and Kano.
Last week, in a move meant to resuscitate the current currency slump in Nigeria, the Industrial and Commercial Bank of China Ltd and the Central Bank of Nigeria signed a deal on Yuan transactions.
The deal meant the Yuan will flow freely around Nigerian banks and will even be included in the country’s foreign exchange reserves.
Since 2014 when Yuan was recognised as a likely global reserve currency, Ghana, South Africa and Zimbabwe have integrated the currency into their financial markets.
Reacting to this, President of the Association of Bureau De Change Operators of Nigeria (ABCON), Mr Aminu Gwadabe, said the Federal Government’s plan to increase the availability of Yuan was already favouring the Naira against the dollar.
Gwadabe said that since the announcement, the Naira had appreciated by N10 by Friday and by Saturday evening it further appreciated marginally against the dollar.
Gwadabe said the dollar was now changing for between N307 and N310 as against the former rate of N320 and predicted that once the policy is in force, the price of dollar will continue to fall.
“This new policy will help the informal payment sector. You know more than 50 per cent of foreign businesses in Nigeria are with China. Before now, Nigerians doing business in China have to change their money to dollar, then from dollar to Yuan”.
“You can all testify to the number of made in China things in the country. So if small and large businesses can convert straight to Yuan, it’s better. Also we are hearing that the Yuan will not only be available in the Banks but in the BDC segment as well. It will mean more business for us because most African countries will come to Nigeria to source for Yuan and we are excited about this development and we welcome it,” he said.
He urged the CBN to monitor the development closely for effective implementation of the policy.
Albert Oladapo, a United Kingdom based lawyer and financial analyst, said what the deal means is that there will be cheaper Chinese imports because the “triangular Naira-Dollar- Yuan merry go round” has be short-circuited.
His words: “This move will impact positively on inflation and make things easier for Nigeria depending on the volume of trade with China. The same old rules that restrict official forex transactions will also apply, which means sundry private endeavours will get the Chinese currency at some pro rata black market rate.
“China is the power on the horizon. It beats the USA in GDP growth since 2014 according to World Bank data which allows for payment parity. The conclusion is that we must credit Buhari with some wisdom and courage here. The US has always been phlegmatic in its relationship with Nigeria and I foresee that Buhari will suffer some backlash for that move.
“The propaganda that the pact will ease our exchange rate problem is a gross exaggeration with all kinds of dubious economics on display. But on the margin it is full marks for Buhari.
“Yes the Chinese tinker with their currency and do not use market forces wholesale as the western world professes to do. The fact is that China has attained the biggest economic backbone over the last 10 years as the fastest growing economy and the industrial warehouse of the world. Thanks to those same mixed principles.
“I recall Black Monday. It was a date in August last year when the Shanghai stock exchange fell. All the other exchanges from DAX to FTS, etc buckled. It was a sad day for the investment world. They sell cheaper things and are less judgmental in their relationship with others. It was a smart move in the interest of the country”.
To Rasheed Alao, an economist, the development needs to be studied properly by all stakeholders and those in government as well as the leadership of the Central Bank of Nigeria to avoid any pitfall that may appear along the line of implementation.
Alao, a Phd holder and a lecturer of Economics, added that “the fact that the Chinese economy is doing well in the last 10 years is not enough prove that the Yuan will help Nigeria’s economy out of the woods.
However, he was quick to add that the Yuan is stable enough to assist the stabilisation of the naira.