Introduced
A currency swap is an agreement in which two parties exchange the principal amount of a loan and the interest in one currency for the principal and interest in another currency.
At the inception of the swap, the equivalent principal amounts are exchanged at the spot ratesource
In April 2018, China proposed a currency swap agreement to Nigeria, this swap if consummated means that about 15billion Yaun (about 1.17 billion Dollars) will be swapped for about 720 billion Naira in 3years.
Moreso, in May 2019, Aminu Gwadabe the president of belareau de change operators of Nigeria in his advice to CBN in Lagos said; this swap deal will help reduce the costs of important and export.
Why The Currency Swap Deal?
Worthy of note are the facts that: 70% of imported good we use in Nigeria comes from China and Asia, while about 12% come from America. From this statistics, it is not wise for us to continue using dollars to trade with China from whom we buy most of our consumables.
Where:
- Dollar Vs Naira = $1 : #500
- Yuan Vs Naira = ¥1 : #47
If the swap deal is signed by the Apex bank in Nigeria (CBN) it's obvious that most of the items we buy from China will cost lesser than than before. That's to say, that a Techno phone that used to sell at #80,000 will now see for as low as #25,000.
Nevertheless, this positive change will not meet everyone well especially the looters of our common wealth.
Other importance may include:
- Will protect the Nigerian business comunity from constant fluctuations of the third currency.
- will help reduce inflation.
- Will help in settling our Dept with China.
Conclusion
This makes Nigeria the third African country to accept this deal from China after South Africa and Egypt.
I hope the government continues to make positive economic alliances to strengthen our Naira, reduce inflation and boost our gross domestic products (GDP)