Will Currency Swap deal stifle Nigerian economy?

By Simon Akoje

Financial analysts have expressed concern that the currency swap deal recently signed by the Central Bank of Nigeria (CBN) and the Peoples Bank of China (PBoC) will stifle the Nigerian economy.

The Currency Swap Deal was signed on April 27.
Mr Boniface Okesie, the president Progressive Shareholders Association of Nigeria, told NAN that the currency swap deal was unnecessary.
He said the deal would ensure that majority of the country’s foreign trade deals were channeled to the Chinese economy.
“This will lead to economic dependence despite that Nigeria is a sovereign nation. The policy will lead to the influx of Chinese goods into our country considering that we are contending with weak regulation,” he said.
Similarly, Dr Austine Nwaeze, a lecturer in the department of Economics, Pan Atlantic University, Ibeju-Lekki, Lagos told NAN that the deal was only good on its surface value.
He noted that in the long run, the initiative would allow the Chinese to compete with our local businesses, thereby, impeding the growth of indigenous firms.
Nwaeze said the only benefit of the currency swap deal for Nigeria was that in the short run, it would address third party sourcing of the Chinese currency by Nigerian importers.
“However, it will take the trade deals with the Chinese to a new height and reduce the pressures of our foreign exchange,” he said.
The CBN and the PBoC have begun the execution of 2.5 billion dollars (Renminbi 16 billion) bilateral currency swap agreement entered into over two years ago.
Godwin Emefiele, CBN Governor led some officials of the apex bank to the signing ceremony in Beijing, China. His PBoC counterpart, Yi Gang, headed the Chinese team. The pact was the result of over two years of negotiations between both banks.
The transaction is aimed at providing adequate local currency liquidity for Nigerian and Chinese industrialists and other businesses in order to reduce their difficulties in the search for a third currency.
In a statement, CBN Acting Director, Corporate Communications Isaac Okorafor, explained that Chinese businesses would get naira liquidity and Nigerian businesses, will get RMB liquidity under the agreement.