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41 Items remain banned under Nigeria-China swap deal —CBN

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Uncertainty beclouds West Africa's single currency deadline

The Central Bank of Nigeria (CBN) has said the Nigeria-China currency swap deal will not cover the importation of the 41 items already prohibited from the official foreign exchange market.

Isaac Okorafor, acting Director, Corporate Communications, made the disclosure in an interview with the News Agency of Nigeria (NAN) on Sunday in Abuja.

According to him, this will ensure that the currency deal does not stifle local companies and make Nigeria a dumping ground for Chinese goods.

Okorafor said that the apex bank had already taken adequate measures to ensure that doesn’t happen.

The bank had released a circular in June 2015 anouncing the prohibition of 41 items from accessing foreign exchange (forex) from official sources, in a bid, according to the bank, to ensure efficient utilization of forex.

The CBN recently signed a bilateral currency swap deal worth USD2.5bn (N720bn) with the Peoples Bank of China (PBoC).

“We are going to focus on exports to China. Also, remember that we already export cassava products to China as well as leather, hides and skin to China amongst others.

“So this deal will open further the export market to China. Also, I want Nigerians to know that the items that will come in are not necessarily finished goods, so the issue of Nigeria becoming a dumping ground for China does not arise.

“This is because the 41 items that had initially been banned from the Nigerian foreign exchange market will still not qualify under the deal.

“The exchange of currencies between the Nigerian Central Bank and the Chinese Central Bank will make it easier for our entrepreneurs to have direct access to foreign exchange in Renminbi.

“Before now, when importing necessary machinery or merchandise from China, you first exchange Naira for the dollar before changing it again to Renminbi and this puts pressure on the Naira.

“Now what it means is that a large portion of the demand for dollars in Nigeria has been lifted off the back of the Naira and put directly on the Chinese Renminbi.

“And so it is a positive development as it will enhance the value of the Naira and reduce our dependence on the dollar for imports.”

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Okorafor explained that the two central banks were still work on the exchange rates between the Naira and Renminbi.

“As we speak, the modalities, the operational manual and the guidelines are being developed. But I can assure you that the exchange rate will be such that it will be competitive, fair to all and will not hurt our local producers and importers,” he said.

According to him, once everything is settled, Nigerian entrepreneurs will be able to access Renminbi through money deposit banks, using similar rules for the dollar but a clearing bank would be appointed for the transaction.

He said one of requirements for the appointment was that the bank must have a branch in China, which some Nigerian banks already have.

Okorafor said one of the advantages of the deal was that it would encourage Chinese companies to set up factories in Nigeria, which would lead to industralisation and job creation

“Chinese investors are interested in setting up shop here. And that is because if they produce here, it will be better for them.

“The cost of transportation, shipping, and all that, will be eliminated. We have a good environment, so a good number of them are interested in setting up production lines here.

“Also, when they do that, they are not going to employ only Chinese workers. A greater portion of the job opportunities in these plants will be filled up by Nigerians. So for us, it’s a good deal.”

Okorafor added that the currency swap deal would enable the Naira appreciate against the US dollars as the demand for dollar eases.

“China accounts for a quarter or more of imports into Nigeria. The exchange of currencies between the Nigerian Central Bank and the Chinese Central Bank will make it easier for our entrepreneurs to have direct access to foreign exchange in Renminbi (Chinese currency).

“Before now, when importing necessary machinery or merchandise from China, you first exchange Naira to the dollar before changing it again to Renminbi and this puts pressure on the Naira.

“Now what it means is that a large portion of the demand for dollars in Nigeria has been lifted off the back of the Naira and put directly on the Chinese Renminbi.

“And so it is a positive development as it will enhance the value of the Naira and reduce our dependence on the dollar for imports,” he said.

The 41 prohibited items include: Rice, Cement, Margarine, Palm kernel/Palm oil products/vegetables oils, Meat and processed meat products, Vegetables and processed vegetable products, Poultry chicken, eggs, turkey, Private airplanes/jets.

Indian incense, Tinned fish in sauce(Geisha)/sardines, Cold rolled steel sheets, Galvanized steel sheets, Roofing sheets, Wheelbarrows, Head pans, Metal boxes and containers, Enamelware, Steel drums, Steel pipes, Wire rods(deformed and not deformed), Iron rods and reinforcing bard, Wire mesh, Steel nails, Security and razor wine.

Others include: Wood particle boards and panels, Wood Fibre Boards and Panels, Plywood boards and panels, Wooden doors, Toothpicks, Glass and Glassware.

Kitchen utensils, Tableware, Tiles-vitrified and ceramic, Textiles, Woven fabrics, Clothes, Plastic and rubber products, polypropylene granules, cellophane wrappers, Soap and cosmetics, Tomatoes/tomato pastes and Eurobond/foreign currency bond/share purchases.

 

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