Nigerian Naira and Chinese Yuan. (Xinhua)
by Olatunji Saliu
ABUJA, Aug. 4 (Xinhua) -- The currency swap deal between China and Nigeria holds bright prospects to grow the economic cooperation of both countries and will bring about great opportunities for their business people, said a local expert.
In an interview with Xinhua, Adetokunbo Kayode, president of the Abuja Chamber of Commerce and Industry (ACCI), noted the yuan-naira swap deal brings about numerous positive impacts, including easing payment issues associated with international trade, particularly between China and Nigeria.
Trade volume between China and Nigeria reached 5.8 billion U.S. dollars in May, marking a 7.3-percent increase over last year's record.
This, according to Kayode, was a great reflection of the new impetus the currency swap deal has brought to the economic and trade cooperation between the two countries.
"This shows the currency swap deal has received a boost and wide acceptance by the business communities of both countries," said Kayode, also a corporate lawyer, tax expert and international arbitrator.
Under the bilateral currency swap agreement signed by officials of the two countries in 2016, a total of 15 billion renminbi for 720 billion naira, or vice versa, will be swapped between the People's Bank of China and the Central Bank of Nigeria in the next three years. The deal can be extended by mutual consent.
With a total of 2.5 billion dollars swapped so far between the two countries' central banks since May 4, Nigeria has become the third country in Africa, after South Africa and Egypt, to sign such a deal with China.
Many financial experts in Nigeria have hailed the policy as a welcome development, noting it will sufficiently provide renminbi liquidity to Nigerian firms looking to do business with China and naira liquidity to Chinese firms hoping to do business with Nigeria.
Kayode said it will further help achieve effectiveness and efficiency in trade transactions between the two countries, without the challenge of seeking another foreign currency.
"For us in the organized private sector, the essence is not farfetched because it has simply made China a trading hub by Nigeria, the West African sub-region and indeed the whole of Africa," he said.
He noted the new development will make the renminbi a free flow currency in the local banks in Nigeria, and consequently included in the west African country's external reserve.
"Let me emphasize that this currency swap means that the Chinese yuan has the capacity and capability to stand shoulder-to-shoulder with other internationally recognized vibrant currencies, such as dollars, euro, and the pound," he said.
According to him, his colleagues in the organized private sector will continue to see this opening as a low-hanging fruit that can easily help improve their business concerns.
"Now our banks can open letters of credit in yuan instead of only the dollar, euro or pound," he stated.
Speaking from a financial risk perspective, he advised that the currency swap deal is restricted mainly to equipment, machinery, and raw materials procurement.