Financial experts in Lagos on Monday expressed divergent views on the Nigeria-China currency swap deal announced last week.
They argued that the deal could address shortage of dollars for import purposes, but are worried that if the volume of exports by Nigeria does not increase, the deal would favour only China.
They said this could lead to the near destruction of Nigeria’s budding industries.
The experts told our correspondent that a substantial increase in the nation’s productive sector was required to reduce the imbalance in the volume of imports/exports between the two countries.
Prof. Evans Osabouhien, a Senior Economist at Covenant University, Ota, Ogun State, said the currency swap between Nigeria and China was a good development, but would have very serious challenges in the long run.
Osabouhien said the deal would ease trade between the two countries by minimising currency losses emanating from the prior conversion of Naira to dollars and back to the Yuan, the Chinese currency.
“The challenge, however, is that there is a huge imbalance in the volume of trade between the two countries.
“The only solution is that there must be deliberate policies put in place to increase our exports to China,’’ Osabouhien said.
The economist noted that the imbalance in the trade volume would lead to the flooding of imported goods from China to Nigeria, thereby killing the few companies struggling to produce.
“If we don’t produce, what then can we export?” Osabouhien asked.
But Alhaji Aminu Gwadabe, president, Association of Bureaux De Change Operators of Nigeria (ABCON), said the deal was an excellent development in the foreign exchange market.
Gwadabe argued that the currency swap deal would also deepen the confidence of foreign investors in the Nigerian economy.
The ABCON chief said the deal would reduce pressure in the demand for dollars in the market and provide currency options for imports.
Another benefit of the deal, according to Gwadabe, is the diversification of Nigeria’s foreign reserves, which he said would make it the clearing house in Africa for Yuan transactions.
“It is a prelude to make the Naira sovereign in the West African economies,’’ Gwadabe said.
He urged the CBN to mandate money deposit banks to open Yuan domiciliary accounts to deepen the agreement.
Gwadabe explained that the volume of Nigeria’s import from China in 2015 was 2.5 billion dollars, graduated to 12 billion dollars in 2017 and now hovers around 18 billion dollars.
“This excludes the 6 billion dollars China’s investment in our infrastructure and 2 billion dollars Dangote Industries expansion loan,” Gwadabe said.
Our correspondent reports that Nigeria and China sealed a currency-swap deal worth 2.4 billion dollars on May 4 in China.
According to the CBN, the deal would provide local currency liquidity between Nigerian businessmen and Chinese businessmen.