The Manufacturers Association of Nigeria (MAN) has called for structured fiscal policies to ensure that the Nigeria-China currency swap agreement truly benefits the manufacturing sector and the Nigerian economy.
MAN made the call in an economic report detailing the implications and benefits of the currency swap agreement made available to newsmen on Thursday in Lagos.
The association, in outlining the benefits of the currency swap to the manufacturing sector, said access to Yuan liquidity at Nigerian banks would make trading transactions smoother and more cost effective.
Reports show that a reduction on the strain on Nigeria’s foreign reserve denominated in Dollars was mentioned among the benefits of the currency swap.
“Micro, Small and Medium Enterprises (MSME) would find importing raw materials, spare parts and machinery from China easier.
“It will in addition enhance leveraging on the technology power of China for Nigeria to attain a sustainable economy.”
On the other hand, the report detailed that unrestricted access to Yuan at an overvalued Naira exchange rate would encourage importation and stifle local production of goods which negates government import substitution agenda.
This, the association explained would cause de-industralization and unemployment.
The economic report further reads that,
“The Nigeria-China currency swap if implemented without appropriate monetary and fiscal policies would bring about challenges which may affect the attainment of national economic aspirations.
“Absence of structured platform for transparent monitoring of the currency swap implementation may result in political and economic crises.”
The association recommends that the Central Bank of Nigeria must ensure constant monitoring so that an increase in demand of the Yuan would not result in depreciation of the Naira.
“There should be timelines for importation of products with relative manufacturing advantage in Nigeria to discourage import surge of finished manufactured production and boost the domestic production.
“Regulatory agencies, especially the Nigeria Customs Service, must be more effective at curtailing smuggling and ensuring that the country is not turned into a dumping site.”
The reports state that a currency swap is designed to protect Central Banks of parties involved from losses owing to fluctuations in currency values.
Also, the Nigeria-China currency swap agreement is expected to aid trade transactions and remove the need to first source for US Dollars in the course of transactions involving the two countries.
The deal is a 3 year tenure which allows to swap a maximum amount of 15 billion Renminbi/Chinese Yuan for 720 billion Naira.