Tuesday, 10 May 2016

President Buhari's trip to China could be worthwhile afterall

Image result for photo of buhari
 While going through the details of President Buhari’s visit to China, I was impressed with one particular point in the agreement signed.
Part of the agreement reached was for the Nigerian government to keep a reserve of the Chinese currency (Yuan) so that instead of changing only to dollar to buy from China, we can change directly to Yuan to buy from China.
The idea behind this agreement is that as a Nigerian, if you want to import goods from any

country including China, you will have to change your money to Dollar in order to be able to use it to buy from any country that is outside Nigeria. The US Dollar is generally accepted so it is accepted by every country in the world. Therefore, if you want to import from China, Brazil, England, Ghana, or from any other country outside Nigeria, you have to change the Naira to dollar. Now we know that the amount of dollars in our reserves is getting exhausted due to the low price of crude oil, so people are finding it difficult to exchange their Naira to Dollar for importation.
But when you look around, you will notice that most of the goods imported into Nigeria are coming from China, almost everything we use is now made in China ranging from electronics down to the smallest
items. Knowing fully well that most of our goods are coming from China and that the dollar is scarce, the president and the Chinese government reached an agreement that the Chinese government will pump their currency into our country. They will do this by paying for the crude oil we supply them with in their own currency Yuan instead of Dollar and in this way we will have a reserve of the Chinese currency Yuan which will be distributed to banks for the purpose of exchange.
So when traders want to go and import from china, they do not have to start looking for dollars that is already scarce, they can easily change their money direct to Chinese currency Yuan and buy with it from China.
 If this is implemented, the pressure on foreign exchange will be reduced and our currency may start to appreciate in the open market.
I don’t know if this was president Buhari’s idea, but if it was, then it’s a sign he’s not totally dumb. What do you think?

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