‘Currency swap deal will reduce forex pressures, speculations’
The currency swap deal between Nigeria and China will reduce pressures on the naira, which is caused by increasing demands for the U.S dollars, President of Abuja Chamber of Commerce and Industry (ACCI), Mr. Tony Ejinkeonye has disclosed.
Ejinkeonye spoke in Abuja on the economic implications and international balance of trades of pegging an agreed exchange rate of N30 to the Chinese Yuan.
He said that people that had kept or hoarded the U.S dollars for speculative trading purpose; will however be adversely hit, because of pegging the Yuan to N30 in settling all imports and exports bills between China and Nigeria.
His words: “Since most of the imported items are from China, many importers from this country would reduce their demands for dollars. This will also help stabilize the dollar-naira exchange rates. “The currency swap agreement is one of the outcomes of the visit of President Muhammadu Buhari to China, and the pact will allow our Nigerian businesses, which import mainly from the Asian country, to conclude their transactions in the Chinese currency instead of the dollar.”
“This new economic agreement will see the Nigeria-China trade, which accounts for over 70 per cent of imports into Nigeria, transacted in Yuan.”
He however noted: “Over 90 per cent of international trade between Nigeria and the world are done in dollars with this putting so much pressure on the naira.”
Ejinkeonye said that the currency swap deal was a good development, as it would make it easier for manufacturers to bring in essential raw materials for production.
According to him, many manufacturers are finding it difficult to get foreign exchange to import basic raw materials.
Uche Uwaleke, an Associate Professor of Finance at Nasarawa State University also said that that one of the economic benefits of the currency swap deal was to reduce the level of exchange rate risk being suffered by importers.
He however said that with this development, there was a need for the Central Bank of Nigeria (CBN) to increase the portion of the country’s foreign exchange reserves held in the Chinese currency to enable it finance three months of imports.
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