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You are here:Home>>Strategic Research & Analysis>>Chinese Yuan joins trading currencies in Nigeria
Thursday, 13 January 2011 14:00

Chinese Yuan joins trading currencies in Nigeria

Written by Administrator
Chinese Yuan/US Dollar Chinese Yuan/US Dollar

A sign of growing Chinese presence in Nigeria and Africa

It was just a matter of time before Chinese currency Yuan will join the family of currencies traded in Nigeria’s foreign exchange market. Therefore it was no surprise when Nigeria's central bank made it official that Chinese Yuan has been included “to a list of currencies that can be used for trade settlement in the domestic foreign exchange market as trade flows with Beijing increase.”

Chinese Yuan will join other 13 currencies including the U.S. dollar, Euro, British Pound and Japanese Yen that are traded in Nigeria’s domestic foreign exchange market. Many other countries including Russia, Turkey, South Africa's Standard Bank and now Nigeria are offering Yuan for bilateral exchange and trade in their local respective markets.

Apart from China’s encouragement to trading partners to employ the use of Yuan for trade transactions and settlements in the local exchange market; it does make sense at this point in time for Nigeria to make the strategic move of expanding the number of currencies in the domestic exchange market with latest inclusion of Yuan.  For China has become a major trading partner with Nigeria, the second largest economy in Africa.

China growing bilateral relationship with Nigeria is progressively stronger, a testament to a successful strategic partnership.  The increasing level of trade and investments between the countries are growing tremendously. According to Chinese Ambassador to Nigeria H.E Mr. Deng Boqing, “The volume of trade between Nigeria and China recorded a significant improvement, rising by 41.8 per cent to N540 billion ($3.67 billion) in the first half of 2010. The trade volume between the two countries grew by nearly 300 per cent since 2004 and reached the peak of $7.2 billion in 2008.”

China with over $2 trillion foreign reserve is making her presence felt heavily in Nigeria. The flowing in of Chinese money and investments in Nigeria is staggering, if not mind bugling.  Short while ago, China signed a $23 billion ‘sunshine deal’ to build four major oil refineries in Nigeria. While in July of 2010 China also signed another business deal to build $6 billion oil refinery in Lagos. It was also recorded that China direct investments in Nigeria has exceeded $7 billion and China is also committing $20 billion investments on Nigeria’s infrastructures. Recently China Export-Import Bank signed $900 million loan with Nigeria.

China is a significant player in Nigeria’s economic landscape with the numerous investments and deals in the country; she has garnered a great deal of respect in Nigeria. China has truly proven to herself and to Nigeria that she is committed partner in country’s development for a long term. In return China needs natural resources especially oil from the oil-rich Nigeria for fueling her economic expansion and feeding the mountainous appetite of her local industries.

With level of China’s contributions to Nigeria’s bulging economy, it is not really a big deal after all for Nigeria to trade Chinese Yuan in the domestic foreign exchange market.

Strategic significance

On part of China there will be a growing confidence of their presence in Africa and Nigeria in particular. China can flex its financial and economic power in Nigeria and the admission of Chinese Yuan in domestic currency market shows that China is a significant player in Africa. Although the presence of Yuan and other currencies in Nigeria’s market will decrease the demanding pressure on dollar, the principal trading currency in the market.

The point must be that dollar will not be displaced in the market by any other currency in the Nigeria’s domestic foreign exchange market. Dollar continues to be the dominant currency due to its value, universal acceptance and in its surging demand by the local banks and business community of Nigeria.

The volume of Yuan at initial stage maybe small, but progressively it will get bigger because the presence of China with regards to trade and investments will drive the demand for Yuan. The Nigerian local business communities are grateful of the arrival of Yuan in the market for they do not have to buy other currency first and convert it to Yuan later.

Chinese Yuan presence in the baskets of currencies used for transactions in the local African markets will continue to increase. The massive economic presence of China in Africa will continue to mature and enhance as Africa leverage the economic bilateral relationship with China to develop her economy.

 

 

 

Last modified on Thursday, 13 January 2011 14:06

1 Comment

  • Comment Link Giselle Saturday, 04 June 2016 14:04 posted by Giselle

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