#SoundOff: Examining Buhari’s Disastrous Decision To Tie Naira To Chinese Yuan

#SoundOff: Examining Buhari’s Disastrous Decision To Tie Naira To Chinese Yuan

By Opinions | The Trent on April 14, 2016
Nigeria's President Muhammadu Buhari
Nigeria President Muhammadu Buhari arrives at Indira Gandhi International Airport for the Third India-Africa Forum Summit in New Delhi on October 27, 2015. | Sajjad Hussain/AFP/Getty Images

I see another brainlessness all over the place; celebration of visiting President Buhari’s deal with China. I hear a lot of uninformed people stating ‘aha, finally, $1 = N1 is on the horizon’. I’m yet to see a more stupid mental occlusion than this.

RELATED: From Dollar To Yuan: Nigeria Signs ‘Landmark’ Currency Deal With China 

Now let’s examine this rhetoric:

“It is a credit that is on the table as soon as we identify the projects,” Nigerian Foreign Minister Geoffrey Onyeama told reporters after Buhari met Chinese President Xi Jinping. “It won’t need an agreement to be signed. It is just to identify the projects and we access it.” – Reuters

There are two things here:

1. This is just a credit line, one that can be terminated at any time, one designed to be a string to hold Nigeria to China’s helm. What this means is that anywhere and in any direction China goes, all she needs to do for Nigeria to kowtow their lead is wink at Buhari and say ‘remember that thing I told you’.

2. No agreement was signed – nothing enforceable. It’s as simple as that. Whoever said the Chinese are not smart! This ambiguous statement could have been over a telephone call! Even a text message from Lou Jiwei, the Chinese Finance minister to Kemi Adeosun would have carried more weight.

Next is the pesci issue of the yuan vs dollars.

“Yuan is free to flow among different banks in Nigeria, and the renminbi has been included in the foreign exchange reserves of Nigeria,” Lin said. ~ Reuters

Let me explain;

1. China will keep devaluing her currency with Uncle Sam crying wolf at every point they do that.

2. That means the US dollars will keep getting stronger against the Chinese Yuan AND EVERY CURRENCY WITH SIGNIFICANT EXPOSURE TO IT, including those its reserves are denominated in Yuan.

Secondly, a stronger Dollar on Yuan devaluation news will reflect across the board in more nuanced ways; eg it will trigger depreciation of other currencies tied to it and more importantly, those with ties to the Yuan.
Double wahala for dead body be that.

Chinomnso Awazie is a engineer, political activist, and new media professional. Connect with him on Facebook.

The opinions expressed in this article are solely those of the author.


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