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Economists evaluate Nigeria-China currency swap

Economists evaluate Nigeria-China currency swap
Written by Maritime First

… As Group tasks Nigerians on philanthropy***

Some Financial Economists have expressed great concerns on the minor influence that the Nigeria-China currency swap had on the country’s economy, three years after.

The experts told the newsmen in Lagos on Friday that the volume of currency import so far traded, had not been significant, though a few swaps took place.

The pact which marked three years of implementation in April, was signed on April 27, 2018, to ease demand pressure on the country’s supply of foreign exchange.

The Chief Executive Officer of Arvo Finance, Mr Ayotunde Bally, said that the pact had not been fully utilised due to a decrease in the drawdown of the money input of the Chinese Yuan to the Central Bank of Nigeria.

“This pact which was aimed at creating a harmonious relationship between the two countries has not been utilised as it ought to be.

“Statistics has it that Nigeria- China bilateral trade which was around two billion dollars in 2002 is within the space of about 14 billion dollars in contemporary years.

“And yet, we cannot boast of about three billion dollars Yuan being utilised in such market transaction,’’ he said.

According to Bally, that has clearly displayed the negligence of the pact by most business importers.

He said the poor state of the pact was due to ignorance and the benefits of the pact to those who utilise it.

Also read: Remittance inflows to Nigeria declines by 28% in 2020 – World Bank

“Also, the deliberate avoidance of the pact by those who believe transactions are easier with dollars or some other methods like Bureau De Change among others.

“Even those who know about the pact but avoid it, indicating that it is not lucid and that the regulations and procedures are rigid to them,” he told newsmen.

He advocated massive sensitisation on  the usefulness of the pact to both the business individuals and the country at large.

Mr Johnson Chukwu, Founder of Cowry Asset Management Limited, also said that the pact recorded minimal benefit to the economy.

“If you look at our demand for foreign exchange particularly for imports, you will observe that we still have pressures coming from import demand.

“China is our biggest trading partner and our largest import market.

“We bought more products from China than any other country in the world. So, if the currency swap has been very significant, then the pressures we are witnessing on the balance of trade would have been abated.

“So, I do not think the volume of currency import has been significant.

“Certainly, there must have been a few swap that has taken place since then but it is clearly not significant because if it was, it would have reflected in our balance of trade,” Chukwu said.

According to him, China accounts for more than 25 per cent of our import; so we should not have a currency swap that delays immediate payments of our foreign reserves.

Also, Prof. Ndubisi Nwokoma, Director, Centre for Economic Policy Analysis and Research (CEPAR), University of Lagos, said that the swap deal had positive impact on the naira exchange rate with major currencies.

“The Nigeria-China currency swap deal, according to reports, has some positive impact on the stability of the naira exchange rate with major currencies.

“But,  its effect is limited by the volume of trade between Nigeria and China.

“With decline in global productivity occasioned by the COVID-19 pandemic and other factors, the effect appears not to have achieved the originally intended objectives.

“Nigeria has been bedeviled by other economic challenges. The current sorry state of the country’s exchange rate is quite instructive in this regard,” Nwokoma said.

In another development,  A political group, Tinubu Vanguard, on Monday called on Nigerians to imbibe the culture of philanthropy.

The group charged Nigerians to be their “brothers’ keeper” as the country tackled economic and security challenges.

The Director-General of the Tinubu Vanguard, Dr Johnny Benjamin, gave the charge in the Abuja National Mosque at the sideline of distribution of food items to indigent members of the society.

Benjamin said that the idea of food distribution was to identify with poor Muslim brethren in the aftermath of the 30 days Ramadan fasting and Eid celebrations.

He called on Nigerians to break ethnic and religious barriers and forge a common front to tackle various national challenges.

“This exercise is a mark of solidarity and support for the less privileged members of the Muslim community,” he said.

The director-general of the organisation criticised the lingering security challenges across the country.

He, however, commended the government and security agencies for their efforts to restore law and order.

The National Secretary of the group, Mr Jacob Obi, urged the beneficiaries of the humanitarian gesture to reflect and practice all the lessons learnt during Ramadan.

The group offered prayers for security and peaceful coexistence in the country.

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Maritime First