The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has emphasized the strategic significance of the Nigeria-China Currency Swap Deal for the country’s maritime industry.
Speaking at the Maritime Reporters’ Association of Nigeria (MARAN) Breakfast Meeting, Cardoso who was represented by Mr. Anthony Ogufere, Special Adviser to the Governor on Finance and Strategy said that the agreement could revolutionize trade between the two nations by reducing transaction costs, enhancing financial predictability, and increasing trade competitiveness.
Key Benefits for the Maritime Industry
Reduced Transaction Costs*: The currency swap agreement eliminates the need for third-party currency conversions, significantly lowering transaction costs in the trade value chain, including shipping costs.
Increased Financial Predictability*: With Nigerian importers and exporters able to conduct trade in naira and renminbi, the agreement enables greater financial predictability and stability, critical to the efficient operation of maritime businesses.
Improved Trade Competitiveness*: Reduced costs would translate to greater efficiency and improved trade competitiveness, making Nigeria a more attractive destination for long-term capital investments.
Opportunities for Growth
Vessel Financing and Maritime Asset Acquisition*: The currency swap can open avenues for Nigerian maritime businesses to finance or purchase vessels and equipment from China on favorable terms.
Chinese Investment in Nigerian Port Infrastructure*: The swap agreement could encourage Chinese investment and partnerships in Nigerian port infrastructure, as seen in the Lekki Deep Sea Port project.
Challenges and Recommendations
Trade Imbalance*: Nigeria’s persistent trade imbalance with China, with disproportionately low export flows to China, limits the inflow of Chinese yuan and creates an unbalanced trade relationship.
Limited Awareness*: The slow uptake of Chinese yuan-denominated trade financing by some Nigerian banks and limited awareness among businesses hinder the success of the agreement.
To maximize the benefits of the currency swap agreement, Nigeria must boost non-oil exports to China and enhance private sector awareness. The CBN urges all stakeholders to collaborate on its effective implementation.
