Since giving away the “store” to China, with the Naira-Yuan currency swap deal, the Buhari administration has been making strenuous efforts to justify the awful agreement. The intended benefits of this deal are to reduce the demand for US dollar in trade transactions with China, which accounts for 70-80% of our imports, and ease the demand and pressure to devalue the Naira. However, it is becoming increasingly clear that the deal not only fell short of the intended objectives, but may hurt our economy.
Against this background the Buhari administration has embarked on this silly spin, of a likely increased China imports, to distract from the horrendous deal. When you strip away all the mumbo-jumbo rhetoric, the deal boils down to the following;
• Nigeria who currently gets 70-80% of her imports from China, can now buy goods from China using the Yuan (Chinese currency), instead of the dollar. This in turn encourages more imports from China, maybe up to 95%. Due to our lack of product quality control standards, this may increase the risk of dumping more substandard Chinese products in Nigeria. In turn, we would pay a higher price, in dollars, consequent upon the negative impact on our manufacturing base (due to the cheap imports), environment (landfill, soil poisoning, pollution etc.) and public health/healthcare resources. As a result of this most likely scenario, the Naira remains vulnerable, the demand for dollar unchanged or even increased, while weakening and endangering our economy.
• The new spin of increased Chinese import is a fool’s dream intended to sedate Nigerians. The fact of the matter is China took us to the cleaners. With this deal we will increase our imports from China, and deplete our dollar reserves in favor Yuan – a second rate international currency. In turn China buys our oil (the only export we can offer), in Naira and sells in dollar. Since we don’t manufacture anything of significance, a condition likely to get worse, due to the disincentive to manufacture encouraged by the currency swap deal, the only import China will be interested in is our oil. This they will be very excited to buy more of, in Naira, sell in dollars, keep a large inventory of their foreign reserves, in US dollar, which they then used to purchase US Treasury Bills.
This deal can simply be described as Nigeria handing off dollars (Oil) to China, and in return gets Yuan and greater dependence on China products, with its attendant consequences! Does this sound like a good deal? I don’t think so.
Edward Oparaoji is a professor of pharmacy and chairman, Nigerian-American Leadership Council, a Washington DC Based think-tank. He is a member of the Editorial Board of The Trent, one of the most influential online newspapers in Nigeria. Connect with him on Facebook.
The opinions expressed in this article are solely those of the author.