By Matthew Denis
Mixed reactions have continued to trail the currency swap deal between the Federal Government of Nigeria and the China government as Kwarans lend their voices to the issue.
The Central Bank of Nigeria (CBN) last Wednesday announced the execution of a $2.5 billion bilateral currency swap agreement with the Peoples Bank of China (PBoC) to boost local currency liquidity in the economy.
The CBN Governor, Godwin Emefiele, led the Nigerian delegation to sign the agreement on behalf of the Federal Government, while PBoC Governor, Yi Gang, led the Chinese team at a ceremony in Beijing, China, at the end of negotiations on Friday, April 27.
Speaking on the development, the Kwara State Chairman of Institute of Chartered Accountants of Nigeria (ICAN), Pastor Abel Aiyedogbon explained that, “The China-Nigeria currency swap is made up of Y15 billion Yuan which is equivalent to N120 billion for a period of three years.
“By implication the PBoC will place a deposit of 15 billion Yuan so that customers who want to import from China will transact with the naira equivalent to China Yuan. The exchange rate between the two countries will be N48 to Y1.
According to him, the major advantage is that the amount will be available for import, adding that there are however many disadvantages to the deal.
“There are many disadvantages and one of it is that the amount is solely for import from China, but where you have high quality material in other countries there is restrictions because you can’t go somewhere else to transact with the money.
“Another disadvantage is that it’s a cash and carry arrangement which is not too favourable. If the swap is on the Chinese businessman or community, they will have sufficient naira to purchase raw material from Nigeria, thereby adversely affecting our local industries because those supplying raw material within the economy will be at the receiving end.
“There is also the tendency for Chinese businessmen to dominate Nigeria market thereby leading our economy to become independent.”
“We have to be very careful so that China will not come and dominate our economy, thereby collapsing our industries. You and I know that the qualities of goods from China are not the best.
Aiyedogbon therefore called on the Federal Government not to totally submit to the agreement but have a periodical review of the policy.
On his part, the Kwara State Chairman, Association of National Accountants of Nigeria (ANAN), Mr. Abiodun Ishola, pointed out that the deal could face challenges with regards to clarity over the exchange rate that would be used for transactions, stressing the risk that it could further put China at an advantage over Nigeria in terms of trade between both countries.
“Currency brings an end to multiple exchange rates from naira to dollars and dollars to yuan. This reduces the current high cost of transaction associated with dollar as the world’s de facto reserve currency since the swap arrangement bypasses the dollar.”In the context of minimising concentration risk of having our foreign exchange denominated in United States dollar alone, this is a positive development. Secondly, in view of our huge imports from China, this agreement will help in reducing time as well as transaction cost by eliminating third party currency deals,” he further said.
The Chief Executive Officer of Chieftain Builders, Prince Chinedu Felix Ibeh described the deal as welcome idea.
He said: “With the operationalisation of this agreement, it will be easier for most Nigerian manufacturers, especially Small and Medium Enterprises (SMEs) and cottage industries in manufacturing and export businesses to import raw materials.
“They will be able to import spare-parts and simple machinery to undertake their businesses by taking advantage of available RMB liquidity from Nigerian banks without being exposed to the difficulties of seeking other scarce foreign currencies,” he added.
