Mr Isaac Okorafor is the Acting Director Corporate Communication, Central Bank of Nigeria, In this interview with IFEANYI OSITA, he opens up on the huge benefits of the currency swap deal on small scale businesses. Excerpts:
What is the currency swap deal all about?
The bi-lateral currency swap is an agreement between the Central Bank of Nigeria and the Peoples Bank of China on exchange of a given amount of one currency for another at an agreed rate for a specific period of time, thereafter there is a return of the original currencies.
When was the agreement signed?
The bilateral currency swap agreement between Nigeria and China was signed on the 27th of April 2O18.The governor of Central Bank, Godwin Emefiele signed on behalf of Nigeria while Zhou Xiaochuan signed for the Peoples Bank of China.
What is the financial implication of the agreement?
The agreement involves the exchange of currency worth 2.5billion US dollars in Chinese currency is 15 Renminbi which in Nigeria it is 720billion naira.
What does the swap mean to both countries?
The currency swap deal means that the Central Bank of Nigeria will make available 720 billion Naira equivalent of the 15 Billion Chinese Renminbi in the peoples bank thereby allowing Nigerian importers and Chinese exporters have direct access to Renminbi and Naira without the use of third currency reducing transaction costs.
What benefit do business from both countries stand to benefit from the deal?
The swap deal will ensure that Nigeria’s foreign reserve is not depleted and the pressure on naira have been reduced. Importers and exporters do not need search for dollars during transaction that involves China. The cost and exchange risk involved in transaction as well charges have been eliminated with the deal. It facilitates faster business transaction for both countries.
Would it have any negative effect on Nigerian made goods?
There are a list of item that are not qualify for this transaction but will focus more on the raw materials, finished goods, and simple machines. The deal has put in place measures to eliminate the importation of sub-standard goods. The transaction must meet international standards before this policy we had a list of goods we do not sale foreign currency to. Some of the items are the goods that are made in Nigeria, finished and intermediate goods. They do not qualify for this transactions- tomatoes, eggs and some others. This deal will encourage some industrialization in Nigeria. The currency swap deal with China will not encourage the dumping or importation of substandard goods in Nigeria. The Central Bank is working with some regulatory bodies like customs, Standard Organisation of Nigeria and other quality and standard agencies in Nigeria.
Which banks are involved in the transaction?
There are two bank selected, the Stanbic IBTC bank and Standard Chartered bank while the Peoples Bank of China have made arrangements for some banks in China.
What is the duration of the deal?
The currency swap deal is a three- year- agreement.