President Muhammad Buhari yesterday, signed a ground breaking deal with the Chinese government which will lead to a reduction of dollar denominated trade transactions and potentially cause a massive recovery for the Nigerian currency, the Naira against the greenback.
According to details of the deal gleaned from The Will, a media partner of the Central Bank of Nigeria, the deal was signed on behalf of the Federal Republic of Nigeria by the Central Bank Governor, Godwin Emefiele and by the President of the Central Bank of China.
The deal will see 70% of Nigeria’s foreign imports concluded in Chinese currency, the Renminbi (Yuan) as opposed to the United States Dollar.
The significance of the deal lies in the fact that historically over 90% of the foreign imports into Nigeria have been settled in United States Dollars. With this new dispensation, the pressure on the foreign reserves mainly denominated in dollars is expected to ease, setting the stage for a recovery of the Naira against the Dollar.
The CBN is expected to diversify a huge chunk of Nigeria’s foreign reserve from the dollars to the Yuan to perfect the agreement. Former CBN Governor, Lamido Sanusi began this transition when he was CBN Governor, but only moved less than 20% of the reserves into Yuan.
“It means that the renminbi (Yuan) is free to flow among different banks in Nigeria, and the renminbi has been included in the foreign exchange reserves of Nigeria,” Lin Songtian, director general of the African affairs department of China’s foreign ministry, told reporters in Beijing a few minutes after the agreement was signed between the Governors of the nations’ reserve banks in the presence of President Buhari and President Xi Jingping of China, who is hosting Buhari and top Nigerian officials to a state visit.
According to details of the deal, Nigeria is also set to become the central clearing house for all Chinese currency transactions in Africa.
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