Financial experts in Nigeria have said the country’s five-year-old currency exchange agreement with China has done little to ease the strain on the Naira. According to one expert, the size of the trade imbalance between the two countries is a major impediment to the full implementation of the swap deal.
Releasing Pressure on the Naira
Economists in Nigeria have said that the five-year-old currency exchange accord between the country and China has not had the desired effect of releasing pressure on the Naira. The agreement was signed in 2018, and the exchange rate of the dollar to the Naira has since risen from N305 to $1 to N460 per $1 in the initial weeks of 2019. Against the Yuan, the rate has dropped from N48 to CNY1 in 2018 to N66.70 as at January 1, 2019. On the foreign exchange market, the conversion rate of the Naira to the dollar currently stands at more than N730/$1.
Reports of the currency swap arrangement’s lack of effectiveness have emerged at a time when several other countries are seeking to establish similar agreements with China.
Explaining why the currency exchange arrangement with China has not had the desired effect, Taiwo Oyedele from Nigeria pointed to the trade imbalance between the two countries. “The implementation has been a challenge due to the trade imbalance between Nigeria and China. We import a lot from China, but we don’t export nearly as much, and the value of the Naira has been unstable,” Oyedele said.
He added that the situation can be remedied by promoting or substituting locally-produced alternatives to imported products.
What are your views on this article? Let us know in the comment section below.
Image Credits: Shutterstock, Pixabay, Wiki Commons
