ABCON urges Nigeria to gain from U.S., China, Russia trade war
• Seeks more Naira-Yuan swap deal, derivatives market support
Nigeria must make the best from the growing tensions between the United States of America and Russia/Asian countries, particularly, China, the Association of Bureau De Change Operators of Nigeria (ABCON), has said.The Association noted that the fear of the dollar losing its global dominance is real, as Russia and Asian countries unite against the United States.
ABCON President, Dr. Aminu Gwadabe, while speaking with financial journalists in Lagos, yesterday, said Nigeria has to strategise to benefit from the emerging global trends, especially to strengthen the Naira-Yuan Swap deal, and boost derivatives market with new product development. The policy shift, he said, had become exigent given that Russia and Asian countries are already becoming less reliant on dollars and its hegemony, advising that Nigeria as an emerging market must not to be caught unaware nor lose any immediate advantage.
Gwadabe noted that the insistence by Russia and China to cause a change in global economic system in such a way as to stop the United States from being able to exert economic pressure on world countries is an indication of how both countries can pursue the agenda, which has certain implications for Nigeria’s economy, its currency and financial system.He recalled that at the recently-concluded, G20 Meetings, in Osaka, Japan, European countries Britain, France, and Germany announced that the special trade mechanism that they have been working on this year is now up and running.
Called the Instrument in Support of Trade Exchanges (Instex), it will permit companies in Europe to do business with countries like Iran, avoiding American sanctions by trading outside the SWIFT system, which is dollar-denominated and de facto controlled by the U.S. Treasury. Gwadabe said the significance of the European move cannot be understated, as it was meant to weaken dollar dominance as the world’s trading and reserve currency.
Besides, talks have been on for years on establishing trade mechanisms that would not be dollar-based, but did not gain any momentum until the Donald Trump’s administration abruptly withdrew from the Joint Comprehensive Plan of Action (JCPOA), with Iran over a year ago.Also, the U.S. had imposed sanctions on Russia over allegations of interference in the Ukrainian conflict, and its Presidential election in 2016, both of which Moscow had denied.
Washington also initiated a trade war with China, and tried to force Chinese tech-giant, Huawei, out of the global market. Gwadabe disclosed that rather than progressing towards a deal, and despite reaching a tentative truce at the G20 Summit in Osaka, the U.S. and China are as entrenched in their positions as ever.
“China is insisting that as a prerequisite to a deal, the U.S. removes existing tariffs on $250 billion worth of Chinese goods. Again, China is unlikely to do more to placate the US and bring the crisis to an end,” he predicted.Speaking further, he said after one year of the intense trade war between both parties, it will be difficult for the U.S. to remove all the tariffs that have been implemented so far to allow for final settlement. He disclosed that Nigeria is already benefiting from the crisis, adding that it has led to continuous rise in crude oil prices, which is good for the naira and the Nigerian economy.
Gwadabe said further that local banks stands to gain more from the $2.5 billion currency swap deal between Nigeria and China, as the economies of both countries need each other. The banks in both countries are not only going to be earning fees from the ensuing transactions, but will begin new lending to businesses. It was these gains and the need to keep the naira stable prompted the apex bank to sign the bilateral currency swap agreement with the People’s Bank of China (PBoC),” he said.
He explained that in local currencies, the swap is worth 15 billion Renminbi (RMB) or N720 billion.The three-year renewable deal will allow for the direct exchange of RMB and naira for the purpose of trade and direct investment between both countries.He also called for a deepening of the Naira-Yuan swap deal. He said that Russia and the Asian countries are already utilizing their Yuan Swap agreement with China to strengthen their local currency, a strategy Nigeria is also expected to pursue.
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