Sunday, October 21, 2018

US-China Trade War: Naira-Yuan Swap More Beneficial To Exporters Than Importers

Indication has emerged that the Naira-Yuan swap deal between Nigeria and China is not likely going to be as successful as earlier projected. This is because, the ripple effects of the trade war between the United State of America and People Republic of China is making the importers in Nigeria and exporters in China to be incurring high costs in their trade transactions. 

A number of importer, who have indicated interest in settling their import bill in Yuan are now requesting that the Bank should discontinue the use of Yuan for their subsequent transactions having used it once or twice. When asked the reason for this, they simply say that their suppliers do not want their subsequent payment to be made in Yuan. In the same vein, some importers have declined the use of Yuan because when they compare the cost to payment in USD, payment for import Yuan has become more expensive.

This request from Chinese suppliers made 3T Impex to launch an investigation to know the possible reasons why the exporters in China are no longer interested in receiving their payment in Yuan despite the fact that it is their local currency. Our investigation revealed that the depreciation of Chinese currency resulting from the US-China trade war has made the importation of raw materials to be more expensive for the manufacturers in China. Therefore, in the bid to reduce the cost of importation they are reverting to payment for their exports in US dollars so as to avoid the extra cost of converting to dollars the Yuan received from their exportation to Nigeria. 

Finally, we will like to draw the attention of the government to the fact that this swap deal with China will benefit exporters more in the present economic situation in China. This is because the tightening of exchange control regulations in China is delaying some exporter’s payment in USD and this could be avoided if payment is in Yuan. Therefore, the Central Bank of Nigeria will do well to issue a guideline for exportation to China using the Chinese Yuan as the currency of payment when registering the NXP form (application form for exportation in Nigeria) for the transaction.

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