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
