Loopholes in Naira-Yuan swap deal

Despite the expectations and benefits of the over the $2.5bn bilateral currency swap agreement between the Central Bank of Nigeria and the People’s Bank of China, the National Association of Nigerian Traders (NANTS) has warned of loopholes that may hinder its successes.

The Secretariat President of NANTS, Ken Ukaoha,  said in a statement that the April 13, 2016 deal exhibits wisdom, high political will and courage on the part of the President Muhammadu Buhari administration to advance trade as a vehicle for economic growth and development in Nigeria.

He however said that while the action was commendable, the deal, with its unrestricted access to the Yuan, at an overvalued Naira exchange rate (N30/Yuan), has the propensity to trigger increased volume of imports to the country.

According to him the surge in Chinese imports if unchecked, given the history of appetite of Nigerians for imported goods, would negate the Federal Government’s import Substitution Agenda, stifle domestic production and place local industries in a pitiable and vulnerable condition with attendant effects that would defeat government’s efforts at job creation.

“NANTS therefore calls on the Government’s agencies and in particular, the Nigeria Customs Service to rise up to her billing in order to guard the nation from unbridled influx of goods. The CBN must ensure that constant oversight and regulation is at its peak so that the rise in demand for the Yuan will not result in a possible depreciation of the Naira against the Chinese currency and further widen the gaps in trade balance and balance of payments in favour of China.

“NANTS calls on Government Agencies like the Standards Organization of Nigeria (SON), the National Agency for Food, Drugs Administration and Control (NAFDAC), the Consumer Protection Council (CPC) to be alert and ready for combat to ensure that the deal and its possible attendant surge in imports does not turn the country into a dumping ground for inferior or substandard Chinese products,” Ukaoha said.

He also called for a review of the existing trade deal between Nigeria and China to strengthen control and sanction mechanism against irregular and sub-standard exports from China targeting Nigerian market.

Listing the benefits of the deal the traders’ association boss said the secured agreement would help provide adequate local currency liquidity to Nigerian and Chinese industrialists and other businesses, thereby reducing the demand for dollar and the attendant difficulties encountered in the search for third currencies.

“We therefore see the deal as a strategic move that would gradually strengthen the Naira against the US dollar and certainly reduce attention to and/or the unwitting ‘dollarization’ of the nation’s economy. While we do not have anything against the US dollar, we however note that its scarcity has remained a nightmare and punishment to the average Nigerian trader. This deal which makes Nigeria become the third African country to have such an agreement in place with China will 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,” he said.