Nigeria Content Online

Some finance
experts have stated that the inclusion of the Chinese currency, Yuan,
to the list of foreign currencies that can be used for trading and
trade settlement in the domestic foreign exchange market will reduce
the pressure of the demand for dollar in the nearest future.

Government recently
added Yuan, to the list of foreign currencies that can be used for
trade settlement in the domestic foreign exchange market, in a bid to
diversify bilateral trade away from the dollar.

“We expect forex
exposure to fluctuations in the US Dollar to be significantly reduced
as banks begin to issue Yuan accounts to their customers” Afrinvest, an
investment advisory and finance firm said.

“Given the Central
Bank‘s commitment to managing the exchange rate at the US$1.00 /
N150.00 – N151.00 band, we expect increased supply of the dollar to
meet demand at the official market” the report added.

The addition of the
Yuan brings the number of tradable currencies in Nigeria to 13, which
includes the U.S. Dollar, Euro, British Pound and Japanese Yen.
Nigerian banks are now permitted to trade in Yuan which is expected to
ease demand pressure on the dollar in the interbank market. Nigeria’s
growing and substantial trade relation with China (especially imports)
is expected to spur demand for the Yuan in the medium to long term.

“It is definite
that sizeable number of our income is coming from China, especially
since 2009. There has been an increase in the imports from Asia,
especially China. More Nigerians are now importing from there and
rather than have to be changing from one currency to the other, they
can have the currency they need directly to transact their business,”
says a banker with Finbank.

However, while some
bank officials are excited about the Yuan introduction, some are simply
indifferent. “A large part of trade is already going to China. Before,
you would have to buy in dollars and then have to change to Yuan but
now, they are saying you can have that currency at once, without having
to change before trading. It is certain that this will reduce the
demand for dollars but I do not know how it will particularly help the
foreign reserves” another banker with First Bank said.

He added that the Central Bank did not state how it is going to fund
the demand for Yuan “so for all we know, it is still going to be from
the same source , the dollars were funded.