Naira-Yuan Currency Swap is for Industry
I have read comments that CBN (Central Bank of Nigeria) through the Chinese Yuan currency swap is encouraging consumerism over pushing for industrialization. That is not true.
If you move nearly a quarter of the import from being intermediated by the dollar, it is simple to expect the demand for dollar to drop. My estimate of the appreciation of the Naira to US dollar by 10% is overly pessimistic.
I do not represent CBN but I am invested in Nigeria to make my calls. Up to 70% of factories in Nigeria import raw materials/tools/equipment from China. From my small office to Dangote, we all source from China. And CBN has been smart for 18 months that only raw materials/tools/equipment are covered by its fair forex policy. If you want to buy gold/watch/etc from China, banks will not allow you to use the fair forex. But if machinery and equipment, you get it. I expect this swap to keep that.
I do not speak for govt but as a person who buys raw materials from China, my bank has been strong to ensure nothing "consumeric" takes advantage of the CBN policy.
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It is fair to be concerned about Africa as it works with China. But this swap is not bad. If it does not offer the choice, the option is to use Naira to buy dollar, and make some money changers richer for no value added. CBN by this swap is saving 20% to most factories. Pay with Yuan and not USD is not evil. They use Yuan in China, not USD. I do not see the evil there.
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Ok, let's hope everything works with the same spirit you highlighted it here, pending when we become strong and robust enough to manufacture some of the items we import from China down here.
As long as the whole swap arrangement doesn't 'scam' Nigeria, both on the short and long terms; no issues.
