Nigerian imports increase as Yuan weakens

In the past three months, Nigerian importers from China have ben benefiting from a weakening in the Chinese Yuan. Analysts are of the opinion that with a cheaper Yuan, an increase in trade volume is inevitable between China and other countries such as Nigeria, which is a major importer of Chinese goods and services.

The Chief Executive Officer of Mega Capital Financial Services who is also a pan-African stock broker, Mr. Dolapo Ashiru, argues that although the circumstance may favour Nigerian importers from China, but there is an imminent need to for Nigeria to embark on local production of its goods, as too much dependence on imports will hinder local production of similar goods;

“China has already positioned itself as a major trading partner for the African market. The weakening of the Yuan will translate to cheaper goods for Nigerian importers from China. It could also translate to higher import volumes from China. But the potential increase in the volume of trade may hamper Nigeria’s focus on improving on its local industries and local production.

“So we need to build our local economy and become a hub for West Africa and also Africa. We need to be Africa’s China and develop a vibrant real sector that will be exporting finished goods to Africa and the rest of the world,” Ashiru advised.

Data from the National bureau of Statistics (NBS) for the first quarter of 2018 shows China as the highest source of imports into Nigeria accounting for about 21.09 percent of total imports at a value of N531 billion.

The Yuan is Asia’s worst performing currency over the past three months, sliding around eight percent against the dollar. As trade friction with the U.S. heated, the People’s Bank of China has been forced to take steps to support the economy and that has included allowing the Yuan to weaken.

The Yuan slid 0.67 percent to 6.8900 per dollar Monday, its biggest loss since July 19, amid a selloff across emerging markets. The offshore rate lost 0.43 percent. China’s government bonds also declined, pushing the 10-year yield up for a sixth straight day. It is now at 3.6 percent.

The Central Bank of Nigeria (CBN) has a Naira/Yuan swap deal aimed at making it easier for Nigerian importers to access Yuan for their imports. The CBN has already started auctioning of Yuan directly to importers.

As at the time of the first swap auction in July, the exchange rate was N56.4 to 1 Yuan but the Naira has since then appreciated to trade at N52.24 to 1 Yuan. Making the importation of goods by Nigeria importers cheaper than it was earlier in the year

“The appreciation of the Naira against the Yuan is good news for importers and the Nigerian economy. It would help the country’s importers acquire raw materials from China at a lower price,” Abimbola Omotola, Head of Research, fixed income securities, Ecobank said.

The Nigerian naira is perhaps the only emerging market currency to have been spared from the on-going volatility of the Turkish Lira which is dragging the rest of the emerging market currency down.

Earlier this year the CBN signed a three-year agreement deal with the People Bank of China on a $2.5bn currency swap deal with the aim to make it 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.