Currency swap agreement: Another milestone for Emefiele’s CBN

By Sunny Igboanugo on 14/05/2018

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Emefiele and his Chinese counterpart, Yi Gang

“We will be professional, we will be apolitical. We will not go into politics. What we will do is to focus on our banking business and use our skills to support the efforts of government in creating jobs for the people, to support economic growth and development for the country.”

These are the exact words of Mr. Godwin Emefiele, Governor of the Central Bank of Nigeria (CBN) that trends on a popular finance and monetary programme on a popular television station in Nigeria. The statement could easily pass as the mission statement of the nation’s number one banker.

Now, whosoever disputes that the CBN boss has not kept to this avowed standard of practice, is either, in the now very popular expressions – a hater or a wailer or both. Emefiele, has been the least visible in the wrong places, in the last two decades or so compared to those who had held that position in the past within that period.

Nobody has heard allegations of undue hobnobbing with either commercial bank chiefs and, or other players in the industry he is supposed to scrutinising. Nobody has also heard or accused him of making high-sounding public statements or engaging in some activities that are not only quite suggestive, but make him a problem to be solved, rather than a problem solver.

He has remained largely the reclusive, conservative and reserved banker, rather than the flamboyant, impetuous and showy character, whose public and even private activities, attract controversies like a naked fire would a moth.

The import of this, presupposes that he is not only working in a turf where he is well seized, but also has quite minimal distraction, a clear head and leg room to do so with his team.  To that extent very little else is attached to whatever has come out of the CBN furnace under him outside his brief. There are no extraneous undertones – social or political – no extra burden to carry or extra war to fight, beyond husbanding and managing the monetary policy of the country.

Yes, there may still be some naysayers here and there including professionals in the economic field or elsewhere, who believe that things could be done differently or those who bear the burden and grudges of the CBN policies under him, such as the ban on 48 items. But their criticisms and reactions, would not only be expected, but could be well contained and in some cases become useful in enriching the policy architecture, unlike dealing with completely superfluous matters that have no bearing on his job.     

So, when without warning on May 3, this year, a statement came from the effervescent spokesman of the apex bank, Mr. Isaac Okorafor to the effect that the CBN and the Peoples Bank of China (PBoC), had signed a $2.5billion currency swap agreement, very few people who had followed the style of the CBN boss, were surprised.

It only confirmed the fact that Emefiele not only keeps to his avowal “to focus on our banking business and use our skills to support the efforts of government in creating jobs for the people, to support economic growth and development for the country,” but doing so behind the scene, as is the tradition of his contemporaries elsewhere, past and present.

Okorafor, Acting Director of CBN Corporate Communications, was just restating the obvious, when he said that the deal was sealed after over two years of “painstaking negotiations.”

Part of the benefits of the transaction, which is valued at Renminbi (RMB) 16 billion, or the equivalent of about $2.5billion, according to him, is to provide adequate local currency liquidity to Nigerian and Chinese industrialists and other businesses, thereby reducing the difficulties encountered in the search for third currencies.


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It is principally to provide Naira liquidity to Chinese businesses and provide RMB liquidity to Nigerian businesses respectively, thereby improving the speed, convenience and volume of transactions between the two countries, he said, adding that it would also assist both countries in their foreign exchange reserves management, enhance financial stability, and promote broader economic cooperation between the two countries.

“With the operationalisation of this agreement, it will be easier for most Nigerian manufacturers, especially Small and Medium Enterprises (SMEs) and cottage industries in manufacturing and export businesses to import raw materials, spare-parts and simple machinery to undertake their businesses by taking advantage of available RMB liquidity from Nigerian banks without being exposed to the difficulties of seeking other scarce foreign currencies.

“The deal, which is purely an exchange of currencies, will also make it easier for Chinese manufacturers seeking to buy raw materials from Nigeria to obtain enough Naira from banks in China to pay for their imports from Nigeria. Indeed, the deal will protect Nigerian business people from the harsh effects of third currency fluctuations.”

With this development, Nigeria joins two other African countries to have the relationship, which countries like Malaysia and Brazil are already enjoying for a while now.

To bring the reality of this milestone home: A few months ago, 30 artisans left Aba, the industrial hub of Abia State for China on a mission to learn automated shoemaking. They have since returned. Now, if they are going to make real headway in transforming the additional skill they acquired during the training into a thriving shoemaking industry the state government is enthusiastic about, they will have to buy the necessary Chinese-made machinery and tools.  

Before now, what they would have done is first acquire dollars, the world’s international currency, with Naira, using the current exchange rate, exchange same with the Chinese Renminbi, before making the purchase.

But with the present arrangement, the hassles of seeking the almighty dollars is eliminated completely, pressure on the nation’s foreign exchange market, reduced and the price of acquiring the machinery made cheaper.

That in itself could mean more money in the hands of the promoters of the enterprises, which could translate into either more or higher grade machines, produce more and cheaper goods and increase their operations for a bigger and more robust business.

Replicate this in more places, ceteris paribus, the prospect for the jolt the Nigerian economy needs to bounce back and play catch-up with those it started the journey with, including China, which is now acclaimed as the world’s second largest economy, may just increase.     

Of course, there are as many critics already as could be expected of any economic step taken either here or in other climes, either by Emefiele or those before him, many arising out of genuine concerns. Standing out prominently is the fear of China itself as a country and its philosophy of international engagement – social, political and economic.

There is the abiding fear that not only would Nigeria, soon become a dumping ground for Chinese goods, but even the little jobs that could be created in the nation’s famished labour market, would be taken over by Chinese workers, who would likely also flood the country.

Besides, there is also the argument that because the instructions for the machineries and tools would be calibrated and written in Chinese language, the question of transfer of knowhow, would also be a ruse.

Plausible as they seem, these fears could materialise only if they are allowed. Even with the measures taken by the CBN to redeem the situation including denying forex to the now much-advertised 41 items on its shop list, Nigeria has not really gotten away from the tag of a dumping ground nation, principally owing to the activities of some unscrupulous elements within the economy.

It is unthinkable that an Emefiele, who has taken such bold and courageous step to tame, substantially, the galloping cost of forex, sturdily and stubbornly stood against the naysayers, who assailed him to no ends on the issue of the 41 items, who withstood the pushes and shoves, at great cost, over the issue of allowing the Naira have a free fall, would go into an agreement that would rather than making Nigeria a production economy, a dumping ground.

Yet, for all he might do to ensure that Nigeria is not walloped with a lot of goals in the implementation of the agreement, he cannot be a player and goalkeeper at the same time.

Naturally, just like Nigeria would not want to be cheated in this engagement, China too, would also be guarding its own goalpost. Negotiations between countries, are usually on the basis of give and take and national interest, in which great skill, grit and intelligence play a great part, as parties would be looking for the greatest advantages. But in the end a good outcome is when the parties strike a win-win relationship, such as is obvious in this arrangement.

From what is discernible in the entire package, Emefiele and his team have done their bit. The challenge some critics envisage, would certainly not be his alone deal with. It ought not. Besides, Nigeria is not the only country with this relationship. Whatever shortcoming, could be dealt with in the same manner others are dealing with theirs. After all, it is said that the blacksmith who doesn’t know the shape of gong, studies the tail of a kite.  


Igboanugo, a journalist, wrote from Abuja   




Posted on May, 14 2018

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