- 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.
Nigeria’s Manufacturing Activity Contracts in September Amid Weak Macro Fundamentals
Manufacturing Sector Contracts in September to 46.7 Index Points Amid Economic Uncertainties
Nigeria’s manufacturing sector contracted again in the month of September, according to the latest report from the Central Bank of Nigeria (CBN).
The Manufacturing Purchasing Managers’ Index that measures the healthiness of the sector revealed that activities contracted to 46.9 index points in the month of September. Below the 50 threshold that separates contraction from expansion.
The CBN report also stated that out of the 14 subsectors surveyed during the month under review, only 4 subsectors reported growth in the following orders: electrical equipment; transportation equipment; cement and nonmetallic mineral products. While the remaining subsectors reported declines in the following order: petroleum & coal products; primary metal; furniture & related products; printing & related support activities; food, beverage & tobacco products; textile, apparel, leather & footwear; chemical & pharmaceutical products; fabricated metal products and plastics & rubber products. Only the paper product subsector was described as stable.
Accordingly, production in the manufacturing sector stood at 47.3 index points in the month with activities expanding in just 5 subsectors out of the 14 subsectors surveyed. Eight of the subsectors contracted in production while activities in one subsector were unchanged.
Demand in the sector also contracted at 46.4 index points as demand dropped for the fifth consecutive month in September. Only six of the 14 subsectors surveyed recorded growth. The remaining eight declined.
Job creation in the sector declined with activities as the employment index stood at 44.1 index points, suggesting that businesses in the sector are not creating new jobs with plunging demands amid falling consumer spending.
Broad-based economic uncertainties continued to dictate productivity in Africa’s largest economy as a series of weak macro fundamentals, counterproductive government policies and COVID-19 negative impacts plunged business sentiment.
COVID-19: CBN Injects N3.5 Trillion into the Economy
CBN Stimulates the Economy With N3.5 Trillion as COVID-19 Impact Thickens
The Central Bank of Nigeria on Tuesday said it has so far injected N3.5 trillion into the Nigerian economy following the outbreak of COVID-19 in Africa’s largest economy.
Godwin Emefiele, the Governor of the Central Bank of Nigeria, disclosed this on Tuesday after the nation’s monetary policy committee meeting.
So far, he said N216.87 billion was injected through the real sector funds; COVID-19 Targeted Credit Facility N73.69 billion; AGSMEIS N54.66 billion; pharmaceutical and healthcare support fund N44.47 billion; and creative industry financing initiative N2.93 billion.
Breaking down expenditure, under the real sector funds, he said 87 projects that comprises of 53 manufacturing, 21 agriculture and 13 services projects were funded.
While in the healthcare sector, 41 projects which include 16 pharmaceuticals and 25 hospitals and health care services were funded.
Under the Targeted Credit Facility, he explained that 120,074 applicants had received financial support for investment capital.
“The Agri-Business/Small and Medium Enterprise Investment Scheme (AGSMEIS) intervention has been extended to a total of 14,638 applicants, while 250 SME businesses, predominantly the youths, have benefited from the creative industry financing initiative,” he said.
In addition to these initiatives, he said, the CBN was set to contribute over N1.8 trillion of the total sum of N2.3 trillion needed for the Federal Government’s one-year Economic Sustainability Plan, through its various financing interventions using the channels of Participating Financial Institutions.
Meanwhile, the monetary policy committee lowered interest rate by 100 basis points to stimulate growth and broaden economic productivity. The benchmarkt intrest rate was lowered from 12.5 percent to 11.5 percent.
Labour to Begin Strike as FG Refuses to Back Down on Petrol Price, Electricity Tariffs
Labour to Embark on Industrial Action to Force FG to Reverse Increase in Petrol Price, Electricity Tariffs
The sudden increase in prices of fuel and electricity tariffs despite the negative impacts of COVID-19 on the Nigerian people has forced the Nigerian labour union once again to announce an industrial action to compel the Federal Government to emulate other economies easing COVID-19 impacts through various palliatives and measures.
Labour union on Tuesday set Monday for what it described as “unprecedented mass action” and “total strike” to get the government to reverse the hike in petrol pump price and the increased electricity tariffs.
At a meeting with members of the National Administrative Council, Presidents and General Secretaries, the Nigeria Labour Congress National Executive Council (NEC) agreed to embark on a total strike against what they described as anti-people policy.
While the ultimatum given to the federal government by Trade Union Congress (TUC) expired on Monday, TUC has extended it till Monday in line with NLC announced industrial action.
NLC President Ayuba Wabba, who read the communique of the meeting, said: “NEC resolved to reject in its entirety the issue of hike in electricity tariffs by almost 100 per cent as well as the fuel price increase in the name of full deregulation.
“This decision is premised on the fact that these twin decisions alongside other decisions of government including the increase of VAT by 7.5 per cent, numerous charges by commercial banks on depositors without any explanations will further impoverish Nigerian workers and citizens.
“Therefore, this increase, coming in the midst of the COVID-19 pandemic, is not only ill-timed but counter-productive.
“NEC also observed that the privatisation of the electricity sub-sector seven years down the line has not yielded any positive result. Whereas, the entire privatisation process, the entire sector was sold at about N400 billion, we are surprised that government within the last four years injected N1.5 trillion over and above the amount that accrued from this important asset.
“Therefore, NEC came to the conclusion that the entire privatisation process has failed and the electricity hike is actually a process of continuous exploitation of Nigerians.
“On the issue of the refineries and also the increase in the pump price of PMS, this particular issue had been on the table for more than three decades and the argument has not changed.
“Whether it is the name of full deregulation or subsidy removal, what is obvious is that it is fuel price hike and this has further eroded the gains of the N30,000 minimum wage because it has spiral effects which include the high cost of food and services and the reduction in the purchasing power of ordinary Nigerians.
“While demanding that our three refineries should be made to work optimally, NEC also concluded that government has business in doing business because the primary purpose of governance is about the security and welfare of the people and if in other countries, governments are maintaining refineries, and they are working optimally for the benefit of the people, Nigeria cannot be an exception.
“In the light of these, NEC decided to endorse the two-week ultimatum given to the Federal Government to reverse those obnoxious decisions and also pronounce that the action proposed by the Central Working Committee is hereby endorsed by the NEC that 28th of September should be the date that those decisions should be challenged by the Nigerian workers, our civil society allies and other labour centres.”
“We’ll meet. We don’t want anything that will cause more financial pain to workers.”
Speaking on the matter and the reason for industrial action, TUC’s President Quadri Olaleye and Secretary-General Comrade Musa-Lawal Ozigi, urged to Nigerians to get ready for the “unprecedented mass action”.
TUC said it resolved to work with the NLC and civil society allies because of the magnitude of the situation. Hence, it suspended the previously planned strike to join force with NLC and others.
“Consequent upon this, the ultimatum which should expire by midnight of today (yesterday) has been shifted to 28th September 2020 for effective and maximum effect.
“We want to use this opportunity to call on Nigerians, especially those in the informal sector, to bear with us while the industrial action lasts.
“There is no need for the pains we bear. It is a needless one. They ask us to tighten our belts while they loosen theirs. Services are not rendered yet we are compelled to pay estimated bills.
“You will recall that this government during its electioneering campaigns in 2014 told the world there is nothing like subsidy. We were told that they will build refineries. All that is history now.
“We run a mono-economy and any hike in fuel automatically will have an adverse effect on us, yet successive governments tow that path because they are not creative.
“As at today, about eight states are yet to commence the payment of new minimum wage and its consequential adjustment even though the President signed it into law on April 18, 2019. We have written letters to the governors and also engaged them in dialogue but all to no avail. Sometimes we wonder if these people have a conscience at all.
“The Congress hereby appeals to all Nigerians to get ready for the unprecedented mass action against corruption, obnoxious policies, rape and other violent offences, breach of the collective agreement, unemployment, etc.
“We also call on the USA, UK, Germany, Spain, etc to support our struggle by placing indefinite visa ban on our political leaders whose stock in trade is to loot and impoverish the masses and the country. We can no longer take it. Enough is enough!”
Business2 months ago
Nneka Ede Purchases Portuguese Football Club, Lusitano Ginasio Clube
News3 months ago
British High Commission to Start Accepting Visa Applications From Nigerians Soon
Business3 months ago
Seplat Appoints Emeka Onwuka as CFO, Executive Director
Forex3 months ago
Naira-USD Exchange Rate to Hit N430 – Report
Finance3 months ago
DSS Arrests EFCC, Acting Chairman, Magu
Government3 months ago
FG Puts School Resumption Plan on Hold as COVID-19 Cases Hit 30,000
Forex3 months ago
Naira Declines Against Pound, Euro After Devaluation
Business3 months ago
TAJBank Joins e-Commerce Giants- Launches Nigeria’s 1st Ethical Online Mall