By Stephen Ubanna
Worried by the low patronage of the Chinese currency, Renminbi, Yuan, by Nigeria importers , for their transactions in the Asian country of China, the Central Bank of Nigeria, CBN, has approved some mouth watery fresh incentives for the importers who patronise the Chinese currency in payment for their importations instead of using the United States, US, dollar to settle the bills of their suppliers in China.
Ahmed Abdullahi, the CBN Director of Bank Supervisions confirmed the Bankers Committee decision, stressing that the it was taken to encourage Nigeria importers to patronise the yuan for their business transactions in China. Abdullahi disclosed that the apex Bank was fully prepared to” weather the headwind of the global economy in order to stabilise business transactions in the country”.
Many had expected the Nigeria importers to resort to the use of the Chinese yuan in settling their Chinese suppliers with the current currency Swap deal between the two countries but nothing appear to have changed as the US dollar is still very much used by importers to make their payments to their Chinese suppliers.
A senior Customs official who spoke to the Magazine at Tincan Island port disclosed that most of the payments for the Containerised cargoes that had been discharged at the port in the recent time from China were made in the US dollar, thus forcing the Valuation officers at the Command to base their duty calculation for such imports on the prevailing exchange rate between the naira to the dollar in the official foreign exchange market istead of the yuan.
the worry of the Bankers Committee, Chaired by Godwin Emefiele, the CBN governor , was that the attitude of importers to use the Chinese yuan in the payment of their importations from China was still persisting because importers are yet to come to terms with the Chinese yuan for their business transactions in China, instead of the dollar.
The CBN officials are optimistic that the low patronage of the yuan would change for the better with the incentives put in place by the apex bank to encourage importers. The CBN was said to have assured importers that” it has enough Chinese yuan to guarantee a stable exchange rate and ensure that there was enough liquidity of the Chinese currency in the country’s weekly foreign exchange market. As at last April, Nigeria has about $49 billion foreign exchange reserves. That much was confirmed by Emefiele, the CBN, governor.
Many believe that with the incentives approved for importers who use the yuan for their business transactions in China by the Bankers Committee to, it would encourage importers of equipment, machinery and other goods to get their invoices from their suppliers in China in the yuan instead of the US dollar. The officials of Commercial banks had predicted a significant drop in the demand for the US dollar by importers in next couple of months because of the incentives put in place by the CBN to encourage importers to pay their suppliers in China with the yuan.
”One of the incentives that was said to have been approved at the Bankers Committee meeting for importers who get their invoices from the Chinese suppliers on their own currency, was a percentage spread to encourage others to start using the yuan for their imports was basically to bring down the cost of importation and price of goods in the country”, Abdullahi had said.
The Bankers Committee may have reasoned in coming out with the incentives that if importers could collect invoices from their Chinese suppliers in the dollar, it would add up to their cost in terms of the naira, going by the current exchange rate of N365.00 at the official forex market. The argument , therefore, was that if the importers could obtain their invoices for their goods ordered from China with the yuan, and going by the exchange rate against the naira, it will be lesser because of the currency Swap deal between the two countries.
It would be recalled that Emefiele, the governor of the CBN and his counterpart in the peoples Bank of China had signed over 16 billion Yuen or $2.5 billion bilateral currency Swap deal recently intended to ”stabilise the international financial market and facilitate and facilitate trade and investment between the two trading partners. The negotiation for the currency Swap deal was said to have taken two years before it was finally signed last May. The CBN has given an insight the currency Swap deal between the two countries will be effective for the next three years and could only be extended by mutual consent of the parties involved in the deal.
Prior to the Bankers Committee decision to come out with incentives to encourage importers to use the Yuen for payment of Chinese Suppliers, Isaac Okrorafor, an Assistant Director and the CBN, Spokesman , had said that deal will bring more flexibility to both China and Nigeria markets by easing up the challeges encountered in the search for the dollar and providing adequate naira liquidity to Nigerian business men and the yuan liquidity to their Chinese counterparts.
He is optimistic that that Nigeria manufacturers, particular, Small and Medium Enterprises,( SMEs )manufacturers and Cortege industries which import raw materials, Spare parts and simple machinery would not have any cause to worry as they would have access to the Yuen from the banks without being exposed to the difficulties of seeking for other scarce foreign currencies. The good news for importers was that the currency Swap deal was that it would be calculated based on the exchange rate of N305.00 to A $1 in the official foreign exchange market.
John Uchechukwu, a business man, believes that the drop in the demand for the dollar by importers because of the CBN fresh incentives would reduce the pressure on the naira, if properly implemented by the CBN. Emefiele , the governor of the apex Bank has made it clear to that cares to listen that all the necessary measures have been put in place to block all loopholes to ensure proper implementation of the currency Swap deal with China to avoid abuse.