The President Muhammadu Buhari and the Chinese President Xi Jinping, recently signed a bilateral currency agreement which was between the people’s Republic of China and Nigeria which also comes come with a lot of benefits to the two countries. China is a county that thrives on imports and production of cheap goods exported all over the world and also China accounts for over 70% of Nigeria’s total imports.
This deal, apart from its economic benefits, it also comes with billions of dollars in loans, infrastructural development, investment opportunities and job creation.
China once again has successfully won one of the biggest African market (Nigeria), no wonder it quickly made Nigeria its clearing house for Yuan denominated transaction for the whole of Africa. This has a lot of economic significance to Nigeria and Africa as a whole. It can simply be interpreted as Nigeria being the financial clearing house to any Yuan transaction in Africa.
China is currently showing the world that it has everything it takes to become the world power. This has always been their challenge with the United States of America who feels threatened by this. So listed below are the biggest winners and losers for this new deal.
Nigeria – China Currency Deal – The biggest winner
1. China : On the long run, the Yuan will become one of the most traded currency in the world overtaking the dollar. This is one of Chinas biggest goal. It will also pave way for more investment opportunities for China in Nigeria.
2. Nigeria : This will help foster strong economic and infrastructural growth to Nigeria, It will create more jobs, It will allow businessmen to easily carry out transactions between them and their counterparts in China. It will provide easy access to loans for Nigeria and Nigerian businesses from China.
3. Importers :- 70% of our imports are currently from China, with the new deal, this means our importers won’t have to first convert their money to dollar before buying in Yuan. Importers will have to deal directly with their buyers in Yuan. For example
If an importer is to buy a good from China worth 6467 Yuan. He will first need to change his naira to dollar. (N320,000=$1,000 ) then change the $1,000 dollars to Yuan which is 6467.00 . But if he decides to change to Naira directly then 1 Yuan is N30.80 naira x 6467 = 199,209.24 .
In the first Calculation he will be spending 320,000 – 199,204.24 = 120,796. In the first process , the importer will lose 120,796 just because of the currency conversion. But with this new deal importers will have a lot to save and we should also expect a reduction in the price of goods exported from China
Bureau De Change/Banks – it means more people will be changing naira to Yuan as compared to naira to dollar.
Sellers of China goods – There will be more people shipping and buying from China as compared to before, therefore it means there will be more money to be made. Companies can easily import raw materials to produce from China.
China Investors: This will provide easy access for China investors to easily penetrate the Nigerian market.
Dangote: This deal also paved way for Nigeria’s billionaire and the richest man in Africa Aliko Dangote, as he will be getting a wooping sun of 2 billion dollars for the construction of two cement plants.
Nigeria – China Currency Deal – The biggest losers
USA – The US is gradually losing its international market share to China, this is because China is gradually becoming more daring and eating deep into their market. China has succeeded in eating deep into their share of the market as a result of several deals with the United Kingdom, Russia, India, and many other countries.
IMF – The international monetary fund (IMF) has been wooing Nigeria to come take its loan which comes with several terms and conditions which some economist have said is not in the best interest of Nigeria but rather will make our economy worse than it is in the long run. Some also claimed most of the terms and conditions favours the western Countries more than it favours us.
The Opposition: The Nigerian opposition party has faulted so many claims in the recent deal with China, but China is bent to continue with the deal.