An economist, Prof. Akpan Ekpo, has urged the Central Bank of Nigeria (CBN) to take seriously the currency swap agreement with Peoples Bank of China (PBoC) to reduce reliance on dollars for trade. This article discusses the importance of implementing the Nigeria-China currency swap and its potential benefits for businesses and the Nigerian economy.
Lagos, Sept. 2, 2023 – An economist, Prof. Akpan Ekpo, has urged the Central Bank of Nigeria (CBN) to take seriously the currency swap agreement with Peoples Bank of China (PBoC) to reduce reliance on dollars for trade.
In an exclusive interview with the News Agency of Nigeria (NAN) on Saturday in Lagos, Ekpo emphasized the need for Nigeria to diversify its trading currency and reduce its dependence on the dollar.
Prof. Akpan Ekpo, a former Director-General of West African Institute for Financial and Economic Management (WAIFEM), stated, “This is the time to implement the Nigeria-China currency swap so that we don’t put all our eggs in one basket. So Nigerians who are dealing with China should deal with Chinese currency or with naira not with a dollar or euro; that will reduce the pressure on the dollar or pound. This is the time to take it very seriously; the Federal Government signed the agreement, it was done briefly then we didn’t know what happened again.
“If you look at the global trend, emerging markets by the Brics are trying to trade with bilateral currency to downplay the importance of the dollar, euro or pound because these currencies are not theirs and they can’t print them. So, if we can now implement the Chinese-naira swap, it will be very helpful for business trade.”
The currency swap agreement between Nigeria and China was signed by the suspended CBN Governor, Godwin Emefiele, and the former PBoC Governor, Yi Gang, in May 2018. Valued at renminbi (RMB) 16 billion (about $2.5 billion), the deal aimed to provide direct currency exchanges between industrialists and businesses from both countries.
The Central Bank of Nigeria explained that the agreement would enhance naira liquidity for Chinese businesses and RMB liquidity for Nigerian businesses, thereby improving the speed, convenience, and volume of transactions between the two countries.
Ekpo also pointed out the link between rising inflation and the exchange rate, stating, “If any businessman spends more naira to buy dollars and does not know what the cost will be the next time, he will jerk up the price. So, inflation passed through the exchange rate will be automatic as businessmen continue to use more naira to buy dollars.”
Implementing the Nigeria-China currency swap agreement would have several benefits for Nigeria. It would reduce the reliance on the dollar, which can be influenced by factors outside Nigeria's control, reducing the vulnerability to external shocks and currency fluctuations. It would also simplify trade transactions between Nigeria and China, making it more efficient and cost-effective.
By dealing directly in Chinese currency or the naira, Nigerian businesses can avoid the additional costs associated with currency exchange, including commission charges and exchange rate fluctuations. This would enhance the competitiveness of Nigerian businesses in the international market and attract more Chinese investments into Nigeria.
The currency swap agreement is in line with the global trend of bilateral currency trade between emerging markets, as countries seek to reduce their dependence on major international currencies. It provides an opportunity for Nigeria to strengthen its economic ties with China, Africa's largest trading partner, and a major global economic power.
Implementing the Nigeria-China currency swap agreement should be a priority for the Central Bank of Nigeria. It would support the diversification of Nigeria's trading currency, enhance trade efficiency, and contribute to the overall stability and growth of the Nigerian economy.
The Nigerian government and the CBN should work together to ensure the effective implementation of the currency swap agreement. This includes creating awareness among businesses about the benefits of dealing in Chinese currency or the naira and providing the necessary infrastructure and support for seamless transactions.
The implementation of the Nigeria-China currency swap agreement would be a significant milestone for Nigeria's economic development and trade relations with China. It is a strategic move that can boost Nigeria's position in the global economy and improve the resilience of its financial system.
Source of content: OOO News 2023-09-05 News
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