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Rising China's Currency (Yuan) and Nigeria's $6 Billion deal

By The Citizen
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By Emeka Chiakwelu
Guess what Chinese government officials probably did once they concluded

the deal with Nigeria; they may have joyfully popped their champagnes and

toast to the victorious renminbi (Yuan), the Chinese rising currency.

Just for a second, try to put on the back of your mind the so-called $6

billion loan given to Nigeria by the clever Chinese and contemplate on

what China is gaining.
China scored a big one by engineering the currency swap with Nigeria,

whereby the Chinese currency Yuan could now become more freely acceptable

in business transaction in Nigeria without cumbersome of convertibility .

With the concluded deal the renminbi (Yuan) will be included in foreign

reserve of Nigeria and will trade in Nigerian banks. In fact, Nigeria will

be clearinghouse for Yuan denominated transactions in Africa.

China being the largest manufacturing center in the world with accumulated

$3 trillion foreign currency reserves by the People's Bank of China cannot

convince the world to respect and honor her currency in business

transactions. The developed and industrial nations especially United

States have shunned yuan because of its instability and artificial

manipulations by the Bank of China.

China's renminbi (Yuan) is not a match to the dominant US dollar for the

whole wide world does business in dollar. It is not by accident that US

dollar is the world reserve currency.
Dollar came to its dominance as a result of its stability, endurance

against cyclical economic fluctuations and consistent value as US monetary

policy is prudently managed with efficient and sound financial

methodological tools by Federal Reserve Bank.
United States of America has been justifiably complained about the

inconsistent of Yuan currency as being engineered and manipulated by Bank

of China to aid in reinforcing China as the largest exporting nation.

China is an export-orientated economy that substantially anchored its

economy on exportation and accumulation of intimidating foreign reserves.

By consciously lowering the value of Yuan, China makes her products

attractive and less expensive to foreigner buyers and consumers.

Since China is not making headways with United States and other industrial

economies in the acceptance of its currency for business deals. China has

become smarter, even more creative in going to Africa and developing

economies to market her Yuan. China is incrementally succeeding, countries

like Kazakhstan, Argentina are following put and now the agreement with

Nigeria is positioned for the currency swap and Nigeria as a clearinghouse

will attract many African countries.
The Chinese saying of 'a journey of thousand miles begins with a single

step,'  is yielding fruits; steadily and gradually China is making inroads

with its currency especially on the countries that lean on China for loans

and financial support.
As for Nigeria with its $6 billion loan from China: Is it good enough? For

the opening door for China to dump her products in Nigeria and fabricate

few infrastructures in the country possibly with Chinese labor and

inflated materials.  Can we say that it is a sweet deal?

The agreement with China – specifically the currency swap will not put to

a halt on the slumping naira neither will it re-position naira against the

potent dollar. It may mildly put some pressure on dollar but it will not

retard the accelerating dollar exchange rate to naira. Nigeria's problem

is not just the declining oil price but herculean mismanagement of her

resources that left country unprepared to take-off as an industrial

entity. How can it be an industrial nation and be producing goods for

export without electricity and safety?
Can Nigeria proudly and truly beat her chest and proclaim her victory in

this China deal?  Nigerian officials should convey to their Chinese

counterparts that the deal must be reciprocal and they can even ask them

to later forgive the loan or make the loan interest free.

Additionally, let the Chinese know that Nigerian labor should be the lion

share in the execution of the contracts and that the inflated price of

materials coming from China is unacceptable. The Bank of China will

continue to manipulate Yuan to support China's economy. Even with Yuan as

part of the mix in the country's foreign reserve, Nigeria lacks the clout

to redirect China's monetary policy.
Emeka  Chiakwelu, Principal Policy Strategist at AFRIPOL. His works have

appeared in Wall Street Journal, Huffington Post, Forbes and many other

important journals around the world. His writings have also been cited in

many economic books, publications and many institutions of higher learning

including tagteam Harvard Education. Africa Political & Economic Strategic

Center (AFRIPOL) is foremost a public policy center whose fundamental

objective is to broaden the parameters of public policy debates in Africa.

To advocate, promote and encourage free enterprise, democracy, sustainable

green environment, human rights, conflict resolutions, transparency and

probity in Africa.  [email protected]      www.afripol.org