In its bid to
diversify Nigeria’s foreign reserve base, the Central Bank of Nigeria
(CBN) has begun training of staff and operators in trading in the
Chinese Yuan.
Lamido Sanusi, CBN
governor, has always made a case for diversifying the country’s foreign
exchange reserve, with a small shift into Asian currencies, in
particular the Chinese Yuan.
“If anything is
changing from a strategic perspective, it is that we’re looking towards
the Asian currencies. If you look at surpluses in China and if you look
at where the RMB (Yuan) is today and the likely future direction of the
Chinese economic policy … we believe some position in RMB would be
good,” he told Reuters last year.
Nigeria’s foreign
exchange reserves, which currently stands at $34.9 billion, is held
more than 80 per cent in US dollars, 10 per cent in Euros, and the rest
in other investments including gold.
Introducing Chinese Yuan
The introduction of
the Chinese Yuan forms part of the CBN strategy to reduce demand for
dollars and thus reduce pressure on the naira. In a circular to
operators on March 7, the CBN offered free training to authorised
currency dealers.
“The Commerz Bank
Representative Office (Nigeria) Limited has offered to train staff of
the CBN and senior level treasury officers of Nigerian banks on the
Chinese Yuan,” the circular stated.
However, some operators are sceptical about how much the introduction of the Yuan would take the pressure off the dollar.
Akin Oladeji,
managing director of Futures and Bonds Limited, a financial advisory
and trading services firm, believes trading in Yuan would deepen the
foreign exchange market.
“As you are aware, Nigeria is gradually becoming a major trading point with Chinese, hence more investment will be encouraged.
“There will be more
volatility in pricing, since the currency trading power will be tied
indirectly by the purchasing power of dollar,” Mr. Oladeji said.
He said demand for the dollar will reduce to the extent of demand for Yuan.
“However, this will not be immediate since there will be lag effect for adjustments to market dynamics,” he further said.
No significant effect
Razia Khan,
regional head of Research, Africa, Global Research, at Standard
Chartered Bank in London, also said the introduction of the Yuan may
not significantly affect the dollar demand on the long run.
“Is the Yuan fully
convertible at the international market? So, the demand for dollar is
not going to be affected by introducing the Yuan,” she said at a news
briefing in Lagos last week.
A currency trader, who did not want to be named, said so far, the CBN has not demonstrated enough willingness to pull it.
“Has CBN told anybody that it is going to sell Yuan at the WDAS? They have never sold anything but dollars at the WDAS.
“So if they make
Yuan an authorised currency doesn’t really mean anything. I am not even
sure the Yuan is fully convertible. It is not a big deal,” he said.
