|Nigerian bankers say RMB trading promising in Nigeria|
LAGOS, March 13 (Xinhua) -- The Chinese currency Renminbi (RMB) is certain to play a vital role in the trade transactions between Nigeria and China as Nigeria's central bank opened trading in RMB since last January and has transformed 500 million U.S. dollars of its foreign reserve into RMB in the past six months, Nigerian bankers told Xinhua in a recent interview.
Apart from the benefit of diversification of a foreign reserve portfolio with weakness in U.S. dollars and euros,
"There's always a discomfort on valuation since most Nigerian companies can only raise dollars and they are exposed to a short- term exchange rate risk between the amount of dollars raised at a particular time to the time of payment in the Chinese currency. The RMB has been appreciating more often against the U.S. dollars, so we found situations where a Nigerian importer will be at a short-fall," said Sola Adegbesan, head of Global Markets of Stanbic IBTC Bank.
"The certainty of being able to buy the Chinese currency at inception takes away that discomfort and it also gives certainty to the Chinese exporter because he doesn't have to build up margins for exchange rate fluctuations. So that certainty would also make the business circle a lot faster because there would be no ambiguity concerning payments," he added.
The overall benefit to both countries is that there would be larger turnover of business and it will be much easier to do. This will encourage people to have more interest in the business relationship. For the Chinese economy, the increase in demand for that currency will build wealth for it internally, Sola said.
The trade volume between
Although the policy is in place, it still takes time for the transactions to be traded in RMB in full swing.
"What tends to happen when something is new, it takes sometime for people to catch on. If I spoke to an importer right now he is indifferent between the RMB or US dollar unless he actually sees the cost savings to himself, " said Adepoju from Standard Chartered.
He said that the key change at the end to happen was being able to convince exporters that the bank can pay them in RMB and therefore getting them to change their invoice from dollars to RMB.
"There are some apprehension if its actually possible and you do know that there are quotas in different countries and for different groups on how much RMB you can trade daily. So its not as if it is freely available," he said.
"However, what we're trying to do is to be at the forefront, have those conversations, engage with the central bank and we believe what the central bank has done and intends to do is a step in the right direction and as we increase awareness we do believe that that first transaction is going to come very soon," he said.
Standbic IBTC Bank, which is a member of
"Our customers don't have to make their payments in dollars again if they want to have access to the Chinese currency. The processing is quite simple. It's just for the customer to indicate the currency in which he or she wants the settlement to be done," said Adegbesan.
"If the person wants the settlement done in the Chinese currency, then it's quite simple because we'll be able to provide payment through our offshore branches straight to our customer in
Stanbic IBTC Bank has had one or two customers who indicated settlement in Chinese currency and it worked quite well. In other countries, it has even gone beyond settlement. In some countries where there are Stanbic IBTC Bank branches, they can pay a customer in cash if that's what he or she wants, he said.
To reduce reliance on the greenback,
Meanwhile, the country introduced a yuan trade settlement scheme in July
According to earlier data released by the central bank,
In terms of RMB going global, Adepoju from Standard Chartered suggest the currency to be freely convertible and there need to be a lot liquidity in the currency.
"Quotas where there is a maximum amount that you can buy in a particular day needs to be removed. So people need to buy RMB at any point in time, in large volumes, in large quantities at the flick of minutes. Those are the steps that needs to be taken before it can be considered really as a global currency," said Adepoju.