Experts from Nigeria have said that the agreement made with China five years ago, which was supposed to help ease pressure on the Nigerian currency, has not been successful. One expert explained that this is because the amount of trade between Nigeria and China is unbalanced.
“Difference in Trades Causing Naira Value to Drop”
Experts say that Nigeria’s 5-year deal with China, which was made to help their money (the naira) and their savings held in other countries (external reserves) has not worked. The Central Bank of Nigeria and the People’s Bank of China both signed this agreement to make sure things stay stable when it comes to swapping money between the two countries.
Since 2018, when a special exchange arrangement was signed, the Nigerian currency (called naira) has been worth less than other currencies like the American dollar and Chinese yuan. In 2018 one dollar was equal to 305 naira, but by April 2023 it had increased to more than 460 naira per dollar. The places where money is exchanged (like banks or the foreign exchange market) were exchanging 66.70 naira for 1 yuan on April 6th, 2023. On the foreign exchange parallel market it was even worse with 730 naira being exchanged for just 1 dollar!
Right now there are other countries like Nigeria that have a trade agreement with China. Mr. Taiwo Oyedele from PWC Nigeria has an explanation for why this kind of arrangement isn’t working to prevent the value of their money, the naira, from getting lower and lower: it’s because of the difference in how much each country trades with the other.
Oyedele said that it’s been hard for Nigeria to implement anything new because we import a lot from China, but we don’t export that much back in return. This has resulted in the decreasing value of our money called the naira. Luckily, Oyedele suggested substituting or promoting more products made within Nigeria instead of buying them from other countries.
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