Opinion

Perspective | Nigeria-China currency swap deal: The untold story. (2)

What's The Truth? Don't forget that the donor country, China is not giving you the currency as cash to boast the country's liquidity ratio index within your foreign account reserve, rather, such amount is consolidated in a syndicated vault under an accounting heading, where all Nigerians purchases from China will be debited with the equivalent of Yan instead of Dollar, as converted in the rate agreed by both countries.

What’s The Truth?

Don’t forget that the donor country, China is not giving you the currency as cash to boast the country’s liquidity ratio index within your foreign account reserve, rather, such amount is consolidated in a syndicated vault under an accounting heading, where all Nigerians purchases from China will be debited with the equivalent of Yan instead of Dollar, as converted in the rate agreed by both countries.

Inquests About China’s Leadership Thinking Patterns:

What gave China the bargaining power to even agreeing to such swap agreement was having leaders with future strategic thinking process.

This was exactly the opposite of what USA negotiated with China at the offshoot of industrialisation, where the Chinese Leadership insightfully asked the American government to build factories, instead of a temporal liquidity buffer, using cheap labour as a bait.
The deal was that, come and build any sort of factory, own it and transfer the proceeds, but after 50 years, you would have recouped your financial outflows with even much profits, the companies has to be reverted to the Chinese government.
For once, America thought that 50 years was long enough and without hesitation, signed the deal.
Not until early 2000 that America started to understand how intelligent the Chinese Leadership was, when the tenure of indegenisation of all the factories stared at them.

The industrialisation of China was a seed planted by insightful leaders who knew that irrespective of the 50 years financial outflows, employment and rapid development won’t be stuffed.

If you ask me, what’s our leaders economic blueprints for the next five years, your guess is as good as mine.
The Chinese leaders weren’t thinking about their personal and immediate benefits, accruable to their individual foreign accounts; but a nationalistic ideological building process, that will effect generations.
Secondly, they were futuristic with their interests on the Chinese very paramount.
By this I mean, production will increase and the essence being economic buoyancy of the Chinese.

Remember that the swapped currency didn’t leave the Chinese shores.
Although, the Chinese businessmen will have access to Naira to purchase raw materials from Nigeria that will be transformed and brought back to Nigeria through the activities of Nigeria businessmen.
You can see that the Yan is still being encircled within the Chinese enclave.

In a layman’s explanation, it’s like opening a credit facility for your customer, and certain amount is earmarked for the credit facilities.
In the agreement, the cost of capital and Net Present value of the credit facilities for today will be calculated based on the agreed period of time expected for the credit facilities to end.

The only benefit of this kind of credit facilities is that the government of Nigeria is guaranteeing to be the Surtee of all creditors from Nigeria and there won’t be mich pressure on sourcing dollars to close the gap of any trade deficit between both countries.

But what we were not told was the interest rates and cost of capital for domiciling such an amount, specifically for Nigeria businessmen easy accessible.

By China producing at higher productivity level, employment will soar with attendant local products that will reduce foreign currency flights from China.
Equally, China’s infrastructures will be built and improve upon, and that will open up China’s economy and reduce brain drains.

‘Currency swap has never helped any nation, rather, it’s another subtitle way of colonialism’.

For Nigeria, it will create an environment for products dumping and definitely, will shrink local products productions.
It will create unemployment and activate the appetite for foreign goods.
There’s going to be capital flights and may create a rip off, if the contents and clauses are not thoroughly appraised before finalization.

It doesn’t help in the Naira stability.
The tendency of fake products and cheap goods may lead to health and safety problems of the citizens.

DSM…Born To Excel.
20180530.

(To be continued tomorrow…What we Stand To Gain…if Any).

Sunny Oby Maduka, PhD is a prolific writer and social commentator

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