U.S market Panics as Buhari signs deal with China

U.S market Panics as Buhari signs deal with
China

In a bid to bridge the widening gap between the
Naira and the Dollar in the Exchange rate market,
President Muhammadu Buhari, on Tuesday, April,
12, shocked foreign investors mainly from the
United States who have been accused of
stockpiling their money in dollars.
The President had consistently insisted that he
would not devalue the naira against the dollar
despite pressure from the International Monetary
Fund, IMF and the United States.
With the West insisting that the nation’s currency
must be devalued, which has always been part of
their conditions for assistance, the East (China)
has offered to rejuvenate the nation’s economy
by investing in capital projects across the
country.
During talks, China and Nigeria agreed to
strengthen military and civil service exchanges
as part of a larger capacity building engagement.
In line with this, China offered to raise it’s
scholarship awards to Nigerian students from
about 100 to 700 annually, while 1,000 other
Nigerians would be given vocational and
technical training by China annually.
According to the Senior Special Assistant to the
President on Media and Publicity, Garba Shehu,
the Chinese President, Xi Jinping also offered
$15 million agricultural assistance to Nigeria for
the establishment of 50 demonstration farms
across the country.
The offer was in response to Buhari’s vow to
make Nigeria self-sufficient in food production.
During Buhari’s visit to Beijing, the Industrial and
Commercial Bank of China Limited, the world’s
biggest lender, and the Central Bank of Nigeria
signed a Currency swap deal on yuan
transactions.
The implication according to the Director-Genera
l, African Affairs Department, China’s Foreign
Ministry, Lin Songtian, is that “Renminbi (yuan) is
free to flow among different banks in Nigeria,
and the renminbi has been included in the
foreign exchange reserves of Nigeria,”
The Minister of Finance, Mrs. Kemi Adeosun, had
said last week that Nigeria was looking at panda
bonds or yuan-denominated bonds sold by
overseas entities on the mainland, which she
noted would be cheaper than the dollar and the
Eurobonds.
An economic expert and Chief Executive Officer,
Cowry Asset Management Limited, Mr. Johnson
Chukwu, noted that the currency swap
agreement will allow Nigerian banks to issue
Letters of Credit in renminbi (yuan) in place of
the dollar or euro.
“It will facilitate trade deals between Nigeria and
China. The ongoing foreign exchange scarcity
has been affecting the amount of Nigeria’s
import from China.
“The new deal may ease pressure on the dollar,
since demand for yuan/renminbi will start rising,”
Chukwu said.
So far, most financial analysts have applauded
Buhari for the trade agreement with China; on
the other hand, China has also expressed
interest in setting up major projects in Nigeria
such as refineries, power plants, mining
companies, textile manufacturing, and food
processing industries as soon as the enabling
environment is provided by the Federal
Government.
Economic pundits have likened this agreement to
his 1984 military regime policy when he directed
the Apex Bank to cause a change in the colours
of the Nigerian currency.
The exercise was designed to render the money
alleged to have been stolen by Nigerian political
leaders useless in their hands.
In a bid not to devalue, Buhari according to
experts is seeking for a way to weaken the dollar
dominated currency by approving Yaun to be one
of the nation’s major foreign exchange
currencies.