- Title: NIGERIA: China's Yuan to become reserve currency in Nigeria
- Date: 6th September 2011
- Summary: LAGOS, NIGERIA (FILE) (REUTERS) CARS DRIVING PAST HIGHWAY VARIOUS OF BANK BUILDING VARIOUS OF FOREX TRADER COUNTING MONEY DOLLAR AND NAIRA PLACED ON COUNTER
- Embargoed: 21st September 2011 13:00
- Location: Nigeria, Nigeria
- Country: Nigeria
- Topics: Economy
- Reuters ID: LVAD6DOWQQGGDO9K4AQPBQNR1PQ4
- Story Text: Nigeria's central bank is diversifying its foreign exchange reserves away from the U.S. dollar and will hold between 5 to 10 percent of them in Chinese yuan, central bank governor Lamido Sanusi said on Monday (September 05).
The central bank has been considering changing its foreign exchange reserves so that it is less reliant on the U.S. currency.
Total reserves currently stand at 32.96 billion US dollars, according the bank's website.
Nigeria's central bank said in January it had added the Chinese Yuan to a list of currencies that can be used for trade settlement in the domestic foreign exchange market as trade flows with China increase.
Bismarck Rewane, an economist in Lagos, says the move will not put the country's economy at risk.
"Nigeria's trade with China, import rate is about 15.1 percent, 15 percent of about 30 billion dollars is significantly more that 4.5 billion dollars, so to start with, is the central bank act putting Nigerian economy or reserves at risk? no, because basically what its doing is immunizing that part of the trade which is done with the Chinese, so it is covering that position upfront because we earn dollars from the oil sales, its is not converting that which exists, its is just hedging against the international trade with China which is very important," said Rewane.
China is an important business partner with Nigeria and the two have embarked on several major projects in the country including construction of a multi-billion dollar free trade zone with Chinese investors on the edge of its commercial capital Lagos.
The free zone is meant to try to develop a local manufacturing base and help reduce Nigeria's import dependence.
Around a third of Nigeria's imports come from Asia, most of them from China, according to the central bank.
Global stock markets were roiled last month after Standard & Poor's stripped the United States of its AAA debt rating, fuelling some investor fears that the dollar may be debased in the long run owing to America's yawning deficit.
However, U.S. credit markets actually strengthened as investors flocked to U.S. Treasuries as safe haven investments.
Rewane also added that introduction of the yuan in the country should not affect Nigeria's trade with the US.
"The Chinese trade has been growing, China is a significant partner with Nigeria so I think both from an economic diplomacy perspective and also from a strategic perspective, it makes sense, so I don't think there is any damage or risk really, the other side of it is that, would it affect the US-Nigeria trade? Not necessarily, Nigeria exports significantly to the US, and imports only about 8 percent of its imports from the US," said Rewane.
Nigeria's central bank has maintained that the dollar and the euro are not going to disappear but will remain important parts of its holdings.
China has signed bilateral currency swap deals with 11 trade partners since the end of 2008 to boost the Yuan's global role.
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