China
has offered Nigeria a loan worth $6bn to fund infrastructure projects in
Africa’s biggest economy.
“It
is a credit that is on the table as soon as we identify the projects,” the
Minister of Foreign Affairs, Geoffrey Onyeama, told reporters who travelled
with President Muhammadu Buhari to China.
“It
won’t need an agreement to be signed; it is just to identify the projects and
we will access it,” he said.
Also,
the Senior Special Assistant to the President on Media and Publicity, Garba
Shehu, said in a statement that the Chinese President, Xi Jinping, offered $15m
agricultural assistance to Nigeria for the establishment of 50 demonstration
farms across the country.
The
offer was in response to Buhari’s vow to make Nigeria self-sufficient in food
production.
The
offer, according to Shehu, was made during talks between Buhari’s delegation
and high-ranking Chinese government officials led by Jinping.
During
the talks, China and Nigeria also agreed to strengthen military and civil
service exchanges as part of a larger capacity building engagement.
In
line with this, China offered to raise its scholarship awards to Nigerian
students from about 100 to 700 annually, while 1,000 other Nigerians would be
given vocational and technical training by China annually.
Shehu
quoted Jinping as applauding the war against corruption being waged by Buhari
and assured him that Nigeria would always have a special place in the affairs
of China.
Buhari
shortly after the talks directed that technical committees be immediately
established to finalise discussions on new joint Nigeria/China rail, power,
manufacturing, agricultural and solid mineral projects.
The
technical committees, he said, would conclude their assignments before the end
of next month.
“China
also expressed an interest in setting up major projects in Nigeria such as
refineries, power plants, mining companies, and textile manufacturing and food
processing industries as soon as the enabling environment is provided by the
Federal Government,” the statement added.
Nigeria
also agreed a currency swap deal with China as it looks for ways to shore up
the ailing naira and fund a record budget deficit, possibly by issuing
yuan-denominated bonds in China.
The
nation is facing its worst economic crisis in decades as sinking oil prices eat
into its foreign reserves and the naira weakens against other currencies.
Reuters reports that Nigeria has been for months
looking for sources to help plug a projected 2016 deficit of N2.2tn as Buhari
plans to triple capital spending.
During
Buhari’s visit to Beijing, the Industrial and Commercial Bank of China Limited,
the world’s biggest lender, and the Central Bank of Nigeria signed a deal on
yuan transactions.
“It
means that the renminbi (yuan) is free to flow among different banks in
Nigeria, and the renminbi has been included in the foreign exchange reserves of
Nigeria,” the Director-General, African Affairs Department, China’s Foreign
Ministry, Lin Songtian, told reporters.
The
move comes after the Minister of Finance, Mrs. Kemi Adeosun, said on Saturday
that Nigeria was looking at panda bonds or yuan-denominated bonds sold by
overseas entities on the mainland, which she noted would be cheaper than
Eurobonds.
The
CBN had said it planned to diversify its foreign exchange reserves away from
the dollar by switching a stockpile into yuan. It converted up to a tenth of
its reserves into yuan five years ago.
Lin
said a framework on currency swaps had been agreed with Nigeria, making it
easier to settle trade deals in yuan.'
Similarly,
the ICBC signed a $2bn loan deal with the Dangote Group, owned by Africa’s
richest man, Aliko Dangote, to fund two cement plants.
“The
interest rate is okay, quite favourable with me,” Dangote said, without
elaborating. “It’s for my two cement companies that we are establishing in
Nigeria.”
China’s
official Xinhua
news agency cited President Xi as telling Buhari that there was huge potential
for economic cooperation, naming oil refining and mining.
In
a speech to business leaders, Buhari said both countries wanted to work
together in the areas of agriculture, fishing and the manufacturing of cars,
construction materials and textiles.'
Aly
Khan Satchu, a portfolio manager at Rich Management, said the deal would pave
the way for panda bonds but this would not be enough to ease pressure on the
naira.
Buhari
has rejected calls to devalue the currency.
“Nigerian
FX policy remains the elephant in the room and China or a panda bond is not
going to be enough to stop what will eventually become a tsunami of a
devaluation,” he said.
An
economic expert and Chief Executive Officer, Cowry Asset Management Limited,
Mr. Johnson Chukuwu, said the deal would help boost trading between both
countries.
According
to him, the currency swap agreement will allow Nigerian banks to issue Letters
of Credit in renminbi (yuan) in place of the dollar or euro.
Chukwu
said, “It will facilitate trade deals between Nigeria and China. The ongoing
foreign exchange scarcity has been affecting the amount of Nigeria’s import
from China. The new deal may ease pressure on the dollar since demand for
yuan/renminbi will start rising.”
A
Professor of Economics at the Olabisi Onabanjo University, Sherriffdeen Tella,
said the currency swap deal was good to the extent of the amount of commodities
Nigeria had to export to China.
Unless
Nigeria has substantial export to China, ease of payment of trade deals between
both nations may not be enough reason to ink such a deal, he said.
Tella
stated, “China must be encouraged to buy our crude oil, gas and other products
that we may have for exports. Otherwise, we will soon run out of renminbi if it
is being demanded only for the purpose of importing commodities from China.
“We
have to encourage China to buy our products so that we can have enough renminbi
in our reserves.”
The
International Monetary Fund had in November agreed to add the Chinese yuan to
its reserve currency basket.
The
decision, which marked another step in China’s global economic emergence, came
after the IMF evaluated the Asian nation’s standing as an exporter and the
yuan’s role as a “freely usable” currency.
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