Ekpo tasks FG on effective implementation of Nigeria-China currency swap

An economist, Prof. Akpan Ekpo, has urged the Federal Government to effectively implement the Nigeria-China currency swap as nothing is wrong with it.

Ekpo, a former Director General of the West African Institute of Financial and Economic Management (WAIFEM), gave the advice in an interview with our correspondent on Tuesday in Lagos.

The expert who spoke on the backdrop of statements made by a section of the public that the deal had failed to achieve its goal, also advised government to diversify Nigeria’s portfolio.

According to him, the Chinese currency is now among the basket of world currencies, in other words, the Chinese currency is convertible.

“There is nothing wrong with the Nigeria-China currency swap. The idea is to enable Nigerian business men and women to be able to utilize Chinese currency in doing business rather than sourcing for dollars.”

“The average Nigerian may be benefiting from buying all kinds of Chinese goods from low to medium quality in Nigeria; some of these goods are imported using the currency swap.”

“The challenge is that we have a trade deficit with China. Nigeria needs to export more non-oil goods and services to China to make the currency swap effective. Giving the stress on the supply of the US dollar, the currency swap with China should be effectively implemented,” he said.

Furthermore, he said the fall of the Naira against the US dollar was not due to the currency swap with China.

He said, “The Nigerian economy is a consuming one and the stock of foreign reserves is influenced by oil revenue mostly. The economy has to be productive and export non-oil goods and services to earn foreign exchange outside of oil. The demand for dollars exceeds the supply hence the depreciation of the Naira”.

Sheriffdeen Tella, a Professor of Economics at the Olabisi Onabanjo University Ago-Iwoye, Ogun State, said that the reason Nigerian business community would not transact much business using the Chinese Yuan, was because it is not a key currency used for international transactions like dollar, euro and pounds sterling.

“It does not have wide circulation and acceptance like those currencies. Nigerian business community cannot access it like others, so its use is restricted (even by Chinese government) despite rising international transactions with China.

“Until the currency becomes international currency in financial markets, there is nothing any country can do than to hold its transactions with China and avoid exchange rate volatility,” Tella said.

The Director, Centre for Economic Policy Analysis and Research (CEPAR), Prof. Ndubisi Nwokoma, urged government to address issues inhibiting effective commencement of the deal.

“There is serious need to address the unbalanced trade between the two countries, bureaucratic bottlenecks, as reported, as well as unnecessary delays inhibiting access to the Yuan (Renminbi) by Nigerian traders.”

“Only about 5 per cent of China’s imports has been coming from Nigeria, hence, these issues need to be addressed in enhancing the workability of the deal and thus minimising the immense pressure on the demand for US Dollars,” Nwokoma said.

Efforts to get the CBN to comment on how the deal, three years after, had reduced pressure on the nation’s foreign reserves proved abortive.

The swap deal is an agreement with a three-year tenure which allows both the CBN and the Peoples Bank of China to swap a maximum amount of Fifteen Billion Renminbi/Chinese Yuan (CNY 15 Billion) for N720 billion.