Dollar In Trouble As Reps Move To Revive Yuan/Naira Swap Deal (WHAT TO KNOW)

Dollar In Trouble As Reps Move To Revive Yuan/Naira Swap Deal (WHAT TO KNOW)

The House of Representatives is taking steps to reinvigorate the Bilateral Currency Swap Agreement (BCSA) between Nigeria and China.

In a resolution made on Wednesday, the lower chamber decided to collaborate with the Central Bank of Nigeria (CBN) to expedite the implementation of the currency swap deal.

This decision followed a motion presented by Jafaru Leko (APC, Bauchi) during the plenary session. Three months after the agreement was signed, the CBN initiated the commencement of the scheme through the Special Secondary Market Intervention Sales (SMIS) retail, specifically designated for the payment of Renminbi denominated Letters of Credit (LCs) for raw materials, machinery, and agriculture.

However, there has been limited information on the progress of this financial instrument.

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In his motion, Mr. Leko advocated for the formal inclusion of the Yuan as a significant currency in Nigeria’s foreign reserves. He emphasized that, given the depreciation of the Naira against the US dollar and other major currencies, monetary authorities should view the Chinese Yuan as a viable alternative for trade.

Mr. Leko proposed the official adoption of the Chinese Yuan (CNY) as a recognized foreign exchange reserve currency, standing alongside other currencies. He urged the Central Bank of Nigeria (CBN) to investigate the necessary mechanisms, policies, and partnerships essential for implementing the transition to the Yuan.

“Global economic landscape is evolving and international trade dynamics are shifting, with China assuming a leading role in global trade.

“People’s Republic of China has a stable and globally recognised currency, the Chinese Yuan (CNY), which is gaining recognition in international trade,” Mr Leko said.

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To buttress his point, the lawmaker said “Adopting the Chinese Yuan as an additional foreign exchange reserve currency might mitigate the adverse effects of Naira depreciation.”

He added that “It would enhance Nigeria’s trade and economic ties with China, a crucial trading partner.”

However, the Deputy Speaker, Ben Kalu, who chaired the session, expressed the view that there was no necessity for the House to advocate for a new policy; rather, the government should reinvigorate the existing currency swap scheme.

Consequently, Sada Soli (APC, Katsina) proposed an amendment to emphasize the acceleration of the 2018 currency swap agreement. The motion, as amended, was approved through a vote led by Mr. Kalu.

The Committees on Banking Regulations, Banking, and Other Ancillary Institutions were instructed to engage with the CBN on this policy and present a report to the House within a four-week timeframe.

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