By M. Amuchie & G. Otobor
Some Nigerians are jubilating over a $2b loan from China and the so nocknamed the Yuan trading deal.
China wants to lend us 2 billion dollars, but they want to give us in Yuan and not the dollar itself.
They are not handing us cash, but service exchange; meaning if we want to buy iron rods, we buy it from a Chinese company and they pay the company on our behalf. If we want to construct a railway, they will construct it for us and deduct the money out of the loan. In the end, we are bound to award contracts to them, cutting out competition from others and fairplay to others (non Chinese companies can’t bid or compete to reduce the costs). They get to value the contract and determine the price, meaning they can sell something worth 200 Naira for N2000 and we don’t have a choice because it is on credit.
The worst of it is that China wants us to pay back in dollars, that is not all, we are moving our foreign reserve to fake currency (Yuan) a currency that is manipulated openly by the Chinese government. Did anyone ask Lamido Sanusi what happened to some of our reserves he moved to Yuan few years ago? They sold us Yuan at 4 to a dollar, only to devalue their currency few weeks later to 9 Yuan per $.
Many Nigerians don’t know that even Chinese companies don’t want yuan, nobody wants it, Chinese foreign reserve is in dollars, China is the largest holder of US bonds, they want dollars by all means.
Also, China have more lobbyists in Washington DC than any other nations on earth, begging American politicians to always make policy decisions in their favour, how can such country save us from USD? Has anyone asked why China hasn’t built any refinery in Nigeria?? They have the money, they want the profit, but never did it.
If China does anything against Washington’s interest in Nigeria, USA that has too much political power over China will just tell them not to do it. China will continue to inflate the contract price, refuse to complete the project and deceive us further.
I don’t blame Chinese leaders for trying to scam us, I blame our leaders for not being smart enough. What do you expect when you have political hacks negotiating on behalf of Nigeria against smart professionals from China? I was thinking Nigeria political leaders will do research about Chinese lobbyists in Washington and understand the interest they are protecting before believing in this Chinese version of Trojan horse called the Yuan Trading deal.
We are the only ones that can help ourselves, let’s implement true federalism system and free market. Development is a culture and not a product, we can’t buy it no matter how much money we have or borrow.
You must be living in a PARALLEL universe if you think that Nigeria’s intention of being a clearing house for the Yuan in Africa means the naira will now hold steady.
If you like, tie your currency with Thailand Baht or Ghanaian Cedi, the value of your currency will always have the value it deserves.
Hong Kong for instance is an administrative region of China, but guess what, its currency is firmly tied to the US dollar!
The Yuan is not automatically going to be operating independent of the dollar to boost the naira in any way.
The only thing that has happened here is that the Yuan becomes an accepted currency of exchange to facilitate direct business with Chinese people. This will not in anyway strengthen the naira but the gains will be in the avoidance of double exchange from dollar to Yuan.
The Yuan will swing with the wind depending on what happens to the world’s controlling currency, the dollar.
The naira will continue its natural descent as we produce and export very little and even trade with China becomes very expensive as the world’s comparative exchange rate will not wait for the Naira/Yuan pretend marriage.
The value of the naira will continue to be subject to the international exchange rate, which is controlled by and inextricably linked to (you guessed it?) the DOLLAR!
The silly idea that this arrangement could crash the dollar is only palatable to people living in a cocoon, in a cuckoo land (Nigeria), with a totally warped sense of reality.
The real winners here are the Chinese who have found another place to ship their milling population to recolonise on the cheap.
Nigeria has taken the path of double parallel which will be unsustainable in the medium term as a consumer nation.
The naira will continue to fall unless you can sell more oil or start exporting something the rest of the world would pay you for.
My projection for the naira is 500 to $1 by year end if the oil price does not improve drastically and we sell oil, the only thing we ‘produce’.
M. Amuchie & G. Otobor, are Economists
Curled from theheraldng.com