- Boost for Nigeria, China Trade
Since the inclusion of the Chinese currency among basket of reserve currencies that have special drawing rights (SDR), by the International Monetary Fund (IMF), the government of China has continued to see it as a reflection of the importance of its currency in the world’s trading and financial systems.
The country’s expanding role in global trade and the substantial increase in the international use and trading of the Renminbi (RMB) has seen it increasingly enter into currency swap agreements with a lot of countries.
Some of the countries include the United Kingdom, Belarus, Malaysia, South Africa, Australia, Armenia, Surinam, Hong Kong, Pakistan, Thailand, Kazakhstan, South Korea, Canada, Qatar, Russia, the European Union, Sri Lanka, Mongolia, New Zealand, Argentina, Switzerland, Iceland, Albania, Hungary, Brazil, Singapore, Turkey, Ukraine, Indonesia, Uzbekistan, and the United Arab Emirates, with the deal totalling over RMB3.137 trillion. And last week, it finalised its currency swap agreement with Nigeria, valued at $2.5 billion.
Central Bank of Nigeria’s (CBN) spokesman, Mr. Isaac Okorafor, who announced this, said the CBN Governor, Mr. Godwin Emefiele, led CBN officials while PBoC Governor, Dr. Yi Gang, led the Chinese team at the official signing ceremony. He said the deal was sealed the preceding Friday after over two years of painstaking negotiations by both central banks.
According to the CBN, the transaction, which was valued at 16 billion RMB, was aimed at providing adequate local currency liquidity to Nigerian and Chinese industrialists and other businesses, thereby reducing the difficulties encountered in the search for third currencies.
The CBN said among other benefits, the agreement is expected to provide naira liquidity to Chinese businesses and provide RMB liquidity to Nigerian businesses respectively, thereby improving the speed, convenience and volume of transactions between the two countries.
“It will also assist both countries in their foreign exchange reserves management, enhance financial stability and promote broader economic cooperation between the two countries.
“With the operationalisation of this agreement, it will be easier for most Nigerian manufacturers, especially small and medium enterprises (SMEs) and cottage industries in manufacturing and export businesses to import raw materials, spare parts and simple machinery to undertake their businesses by taking advantage of available RMB liquidity from Nigerian banks without being exposed to the difficulties of seeking other scarce foreign currencies.
“The deal, which is purely an exchange of currencies, will also make it easier for Chinese manufacturers seeking to buy raw materials from Nigeria to obtain enough naira from banks in China to pay for their imports from Nigeria.
“Indeed, the deal will protect Nigerian business people from the harsh effects of third currency fluctuations.
“With this, Nigeria becomes the third African country to have such an agreement in place with the PBoC,” it explained.
Checks revealed that First Bank of Nigeria Limited, Stanbic IBTC, Standard Chartered Bank (SCB) and Zenith Bank Plc had been appointed the settlement banks for the bilateral currency swap agreement.
With their appointment, the four banks will be responsible for settling the trade transactions between importers and exporters from both countries, likely to take off just before next month.
The reason the four financial institutions were chosen was because StanChart and Stanbic already have operational offices in China, while Zenith and FirstBank have representative offices in Beijing.
However, whereas StanChart and Stanbic can start operations immediately as settlement banks, Zenith and FirstBank will be required to upgrade their representative offices to full operations in China.
While SCB already has a presence in China through its Standard Chartered Bank (China) Limited, Stanbic has been trading in the country through its affiliate, the Investment and Commercial Bank China (ICBC).However, FBN and Zenith Bank were also appointed because they already have representative offices in China.
So, while SCB and Stanbic can start immediately, it would take FBN and Zenith Bank some time to join the settlement arrangement because they would have to convert their representative offices to operational offices.
The settlement banks are expected to handle the trade obligations that would enable an importer in Nigeria, after filling the required documentation, to easily exchange the naira for the Renminbi (RMB) instead of resorting to third currencies such as the U.S. dollar, while the reverse will be the case for importers in China that trade with Nigerian businesses.
Commenting on the bi-lateral agreement, Research Analyst at FXTM, Lukman Otunuga, pointed out that sentiment towards the Nigerian economy was elevated after the nation finally signed the agreement with China.
According to him, the move will not only improve the speed, but also the convenience of transactions between both nations.
“There is a possibility that the naira will strengthen from the currency swap deal, as the demand for dollar drops,” he said.
To analysts at Cowry Assets Management Limited, the currency swap deal wouldfacilitate trade between the two countries, by providing adequate local currency liquidity to Nigerian and Chinese industrialists and other businesses, thereby sidestepping a third currency -the US dollar.
“We expect the arrangement to ease pressure on the limited dollar supply at the Investors’ & Exporters’ forex window (I&E)and hence, enhance stability of thenaira/dollar exchange rate,” the firm added.
But the Head, Global Research, Standard Chartered Bank, Razia Khan, said she does not expect the bilateral agreement to have any immediate impact on Nigeria’s forex reserves.
“Even if the swap were to be drawn on in the future, it would likely show up as a liability on the CBN’s balance sheet. However, the swap is still significant in that it provides greater international liquidity to the CBN, reducing the need for the CBN to hold an especially high level of precautionary USD FX reserves.
“Given the rebound in oil earnings, Nigeria’s reserves are at an increasingly comfortable level. With the swap arrangement in place, it will however be possible for the CBN to draw on this in order to provide the CNY liquidity needed to support Nigerian import demand from China, without having to convert that to US dollar demand first.
“So, in all, this should support expectations of forex stability in Nigeria, even as importer demand recovers. It is a small positive, which is reinforced by the greater positive of rising forexreserves because of the rebound in oil prices and exports,” Khan said.
Also, the Director General of the Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, said the deal would positively impact trade and investments between Nigeria and China.
“It will impact on trade positively between Nigeria and China, because it would make the payment system easier. However, it can only last if the exchange rate remains stable. This is because if there are issues with the exchange rate, it may affect it,” he added.
CBN Governor, Mr. Godwin Emefiele had explained that Nigeria was not the only country that had agreed to a currency swap with China, as several other countries – developed and emerging markets – with growing trade volumes with China had entered into similar currency swaps with the Asian country.
“The agreement on the currency swap with China will definitely benefit Nigeria because the essence of the mandate is to ensure that Nigeria is designated as the trading hub with China in the West African sub-region for people who want the Renminbi as a currency denomination.
“Also for us, we believe that using the renminbi will improve trade with China, as this will encourage importers to open L/Cs in the Chinese currency for the importation of raw materials, equipment and machinery from China, rather than other trading regions, so the agreement will encourage trade between both countries,” he had explained.
This arrangement is also expected tocontribute towards stabilising the country’s balance of payments (BoP) position.
COVID-19: CBN Has Disbursed N83B Loans to Healthcare Sector
The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, yesterday, said the central bank had disbursed over N83.9 billion to pharmaceutical and healthcare practitioners in the country since the outbreak of the COVID-19 pandemic in the country.
Also, Lagos State Governor, Mr. Babajide Sanwo-Olu, has stressed the need for a slash in the cost of governance in the country, saying a lot more resources could be dedicated towards healthcare and critical infrastructure.
They both said this yesterday, at the premiere of ‘Unmasked’, a documentary on Nigeria’s response to the pandemic held in Lagos.
Emefiele, who was represented by the CBN’s Director of Corporate Communications, Osita Nwasinobi, explained: “Building a robust healthcare infrastructure was also vital from a security perspective, as some nations had imposed restrictions on the exports of vital medical drugs as well as the use of drug patents that could aid in containing the spread of the pandemic.
“As a result, we focused our interventions in the healthcare sector on three areas. Building the capacity of our healthcare institutions supporting the domestic manufacturing of drugs by businesses, and providing grants to researchers in the medical field, in order to encourage them to develop breakthrough innovations that would address health challenges faced by Nigerians.
“In this regard, we disbursed over N83.9 billion in loans to pharmaceutical companies and healthcare practitioners, which is supporting 26 pharmaceutical and 56 medical projects across the country. We were also able to mobilise key stakeholders in the Nigerian economy through the CACOVID alliance, which led to the provision of over N25 billion in relief materials to affected households, and the set-up of 39 isolation centres across the country. These measures helped to expand and strengthen the capacity of our healthcare institutions to respond to the COVID-19 pandemic.”
According to the CBN Governor, the banking sector regulator also initiated the Healthcare Sector Research and Development Intervention Grant Scheme, which was to aid research on solutions that could address diseases such as COVID-19, and other communicable/non-communicable diseases.
He said so far, five major healthcare-related research projects were being financed under the initiative.
Speaking further on the call to increase access to health insurance, Emefiele said: “One key aspect which we would have to address is improving access to healthcare for all Nigerians. A key factor that has impeded access to healthcare for Nigerians is the prevailing cost of healthcare services.
“According to a study by World Health Organisation (WHO), only four percent of Nigerians have access to health insurance. Besides food, healthcare expenses are a significant component of average Nigeria’s personal expenditure.
“Out of pocket expenses on healthcare amount to close to 76 percent of total healthcare expenditure. At such levels of health spending, individuals particularly those in rural communities may be denied access to healthcare services.
“Expanding the insurance net to capture the pool of Nigerians not covered by existing health insurance schemes, could help to reduce the high out of pocket expenses on healthcare services by Nigerians. It will also help to increase the pool of funds that could be invested in building our healthcare infrastructure and in improving the existing welfare package of our healthcare workers.”
“The private sector has a significant role to play in this regard given the decline in government revenues as occasioned by the drop in commodity prices. Leveraging innovative solutions that can provide insurance services at relatively cheap prices could significantly help to improve access to healthcare for a large proportion of Nigerians particularly those in our rural communities.”
According to Emefiele, the CBN remains committed to working with all stakeholders in improving access to finance and credit that would support the development of viable healthcare infrastructure in our country.
On his part, Sanwo-Olu said: “What are the lessons that we have learned with the Covid-19? Looking at all the things that Covid-19 has cost us, how are we preparing ourselves?
“The truth be told the structure of our governance system needs to change particularly the cost of governance. We need to speak up and ask ourselves are we ready to change.”
“When it gets to the election it is the same set of people that will come up and people don’t come out to vote and we end up having 20 percent out of 100 percent that will elect those that will govern. So, the change has to be about all of us. That is how the real change that will help us will come,” he added.
Emefiele Says CBN Will Resist All Attempts to Continue Maize Importation
The Central Bank of Nigeria (CBN) has vowed to resist all attempts to continue the importation of maize into the country.
Godwin Emefiele, the governor, CBN, in a statement titled ‘Emefiele woos youths to embrace agriculture’, said: “the CBN would resist attempts by those who seek to continually import maize into the country.”
Emefiele, who spoke in Katsina during the unveiling of the first maize pyramid and inauguration of the 2021 maize wet season farming under the CBN-Maize Association of Nigeria Anchor Borrowers’ Programme, said maize farmers in the country had what it takes to meet the maize demand gap of over 4.5 million metric tonnes in the country.
“With over 50,000 bags of maize available on this ground, and others aggregated across the country, maize farmers are sending a resounding message that we can grow enough maize to meet the country’s demand,” Emefiele said.
He explained that the maize unveiled at the ceremony would be sold to reputable feed processors.
He added that this would in turn impact positively on current poultry feed prices, as over 60 per cent of maize produced in the country were used for producing poultry feed.
Nigeria’s Spending Structure Unsustainable, Budget Head Says
Nigeria’s current trend of spending more money on running the government than on building new infrastructure is unsustainable, the country’s top budget oversight official said.
Low revenue collection and high recurrent costs have resulted in actual capital expenditure below two trillion naira ($4.88 billion) a year for a decade, Ben Akabueze, director-general of the Budget Office, said Tuesday in a virtual presentation.
“Hence, the investments required to bridge the infrastructure gap are way beyond the means available to the government,” Akabueze said. Recurrent spending, allocated towards salaries and running costs, has accounted for more than 75% of the public budget every year since 2011, he said.
Africa’s largest economy requires at least $3 trillion of spending over the next 30 years to close its infrastructure gap, Moody’s Investors Service said in November. The country’s tax revenue as a proportion of gross domestic product is one of the lowest globally, according to the International Monetary Fund.
“Huge recurrent expenditure has constrained the provision of good roads, steady power supply, health care services, quality education and quality shelter,” Akabueze said.
Nigeria should amend its constitution to create six regions to replace the existing 36 states, which each have their own governments, Akabueze said. The country also needs to reduce the number of cabinet ministers to a maximum of 24 from more than 40 and cut federal ministries to fewer than 20 from the current 27, he said.
“No country can develop where a large part of its earnings is spent on administrative structures rather than on capital investment,” Akabueze said.
SpaceX To Launch DOGe-1 Mission Next Year and Accept Dogecoin As Payment
FINANCIAL LITERACY: Unity Bank Kick-Starts One Minute Genius 2.0
Ripple Sees Another Victory As Court Orders SEC to Give Ripple Internal Documents on XRP, Bitcoin, Ether
News4 weeks ago
COVID-19: Nirsal Microfinance Bank (NMFB) Loan – Covid19.nmfb.com.ng
Cryptocurrency4 weeks ago
Cryptocurrency Traders Can Now Trade Stocks on Binance
E-commerce4 weeks ago
China Fines Alibaba Record $2.8 Billion After Monopoly Probe
Social Media4 weeks ago
Lack of Basic Amenities, Unclear Growth Policy Force Twitter to Ghana, Builds Headquarters in Ghana
Bitcoin4 weeks ago
Bitcoin Sets a New Record High at $63,000 on Tuesday
Cryptocurrency4 weeks ago
Rap Icon Nas Could Net $100M When Coinbase Lists on Nasdaq
Government4 weeks ago
SERAP Urges FG to Slash Politicians’ Allowances
Crude Oil4 weeks ago
Oil Rises on Drawdown in U.S. Oil Stocks, OPEC Demand Outlook