RE: CHINA, NIGERIA CURRENCY SWAP DEAL: AVOIDING THE SUBTLE PATH TO NATIONAL RESOURCES MORTGAGE (Part 2)
TINUBU
By Dr. Eugene Nweke
3.0. LIKELY CHALLENGES ARISING FROM THE CURRENCY SWAP DEAL IN THE FACE OF NIGERIA’S PARTICIPATION IN THE IMPLEMENTATION OF THE AFRICAN CONTINENTAL FREE TRADE AGREEMENTS – AfCFTA.
The currency swap deal between Nigeria and China may pose several challenges for Nigeria’s active participation and activities in the Africa Continental Free Trade Area (AfCFTA) implementation. Some of these challenges include:
3.1. Dependence on Chinese Currency:
The currency swap deal may increase Nigeria’s dependence on the Chinese yuan, which could limit the country’s ability to participate fully in the AfCFTA. The AfCFTA aims to promote the use of African currencies and reduce dependence on foreign currencies, but the currency swap deal may undermine this objective.
*3.2 Limited Trade With Other African Countries:* The currency swap deal may focus primarily on trade between Nigeria and China, which could limit Nigeria’s trade with other African countries. This could undermine the AfCFTA’s objective of promoting intra-African trade and economic integration.
3.3. Competition From Chinese Goods: The currency swap deal may make it easier for Chinese goods to enter the Nigerian market, which could lead to increased competition for Nigerian businesses. This could undermine the AfCFTA’s objective of promoting African businesses and industries.
3..4 Tariff and Non-Tariff Barriers: The currency swap deal may not address the tariff and non-tariff barriers that exist between Nigeria and other African countries. The AfCFTA aims to eliminate these barriers, but the currency swap deal may not provide a solution to this challenge.
3.5 Regulatory Framework: The currency swap deal may require Nigeria to adopt regulatory frameworks that are compatible with Chinese regulations, which could create challenges for Nigeria’s participation in the AfCFTA. The AfCFTA requires member states to adopt common regulatory frameworks, but the currency swap deal may create inconsistencies.
3.6 Payment and Settlement Systems: The currency swap deal may require Nigeria to adopt payment and settlement systems that are compatible with Chinese systems, which could create challenges for Nigeria’s participation in the AfCFTA. The AfCFTA aims to promote the use of African payment and settlement systems, but the currency swap deal may undermine this objective.
3.7. Currency Fluctuations: The currency swap deal may expose Nigeria to currency fluctuations, which could affect the country’s trade with other African countries. The AfCFTA aims to promote stability and predictability in trade, but the currency swap deal may create uncertainty.
3.8. Limited Access to African Markets: The currency swap deal may limit Nigeria’s access to African markets, as the deal may focus primarily on trade with China. The AfCFTA aims to promote access to African markets, but the currency swap deal may undermine this objective.
3.9. Inconsistent Trade Policies: The currency swap deal may create inconsistent trade policies, as Nigeria may be required to adopt policies that are compatible with Chinese policies, which could create challenges for the country’s participation in the AfCFTA. The AfCFTA requires member states to adopt common trade policies, but the currency swap deal may create inconsistencies.
3.10. Monitoring and Evaluation: The currency swap deal may require Nigeria to adopt monitoring and evaluation frameworks that are compatible with Chinese frameworks, which could create challenges for Nigeria’s participation in the AfCFTA. The AfCFTA aims to promote transparency and accountability, but the currency swap deal may undermine this objective.
4.0. NEED FOR NIGERIA TO MITIGATE THESE CHALLENGES:
To mitigate these challenges, Nigeria may need to:
4.1. Diversify Its Trade Relationships: Nigeria should diversify its trade relationships to reduce its dependence on China and promote trade with other African countries.
4.2.Develop a Comprehensive Trade Policy: Nigeria should develop a comprehensive trade policy that is consistent with the AfCFTA and promotes the country’s participation in the agreement.
4.3. Strengthen Its Regulatory Framework: Nigeria should strengthen its regulatory framework to ensure that it is consistent with the AfCFTA and promotes the country’s participation in the agreement.
4.4. Promote The Use Of African Currencies: Nigeria should promote the use of African currencies, such as the Nigerian naira, to reduce dependence on foreign currencies and promote intra-African trade.
4.5. Develop a Payment And Settlement System: Nigeria should develop a payment and settlement system that is compatible with African systems and promotes the country’s participation in the AfCFTA.
5.0. NEED TO LEARN AND UNDERSTUDY THE LESSONS AND EXPERIENCES OF AFRICAN COUNTRIES WHO ARE NOW VICTIMS OF THE CHINESE UNPAID LOANS AND BUSINESS DEALS/ AGREEMENTS:
The Center wishes to note that, it’s no secret that China has been investing heavily in various countries around the world, particularly in Africa, through its *Belt and Road Initiative.
However, what is not always clear is what happens when these countries struggle to repay their loans.
Unfortunately, it has become increasingly common for China to take control of economic resources and infrastructures in these countries as a way to recoup its investments.
In specific terms, let us take a look at some of the countries that have found themselves in this situation:
Firstly, is *Angola*, it owes China a whopping $25 billion, and as a result, China has gained significant control over Angola’s oil industry.
second is *Kenya* another country presently, struggling to repay its loans, and China has taken control of its *Standard Gauge Railway* project.
Third, is *Sri Lanka* has also had to hand over control of its *Hambantota port* to China due to debt repayment issues.
Other countries that have had to cede control of their economic resources and infrastructures to China include *Djibouti*, which has had to give China control of its *Doraleh Container Terminal*, and *Uganda*, which has had to hand over control of its *Entebbe International Airport*. *Zambia* has also had to give China control of its *Kenneth Kaunda International Airport*, and *Nigeria* has had to tacitly cede control of its *Lekki Deep Sea Port* in same regards via share interest stakes (as published Chinese has the highest share in the Concession deal).
It’s worth noting that these takeovers are often the result of *debt-for-equity swaps*, where China agrees to cancel some of the debt owed by the country in exchange for control of strategic assets. This can be a contentious issue, as it often involves China gaining control of critical infrastructure and resources in the country.
According to various reports, at least *10 African countries* are at risk of having their economic resources and infrastructures taken over by China due to debt repayment issues. These countries include *Republic of Congo*, *Sudan*, *Cameroon*, *Ghana*, and *Democratic Republic of Congo*, among others.
This calls on Nigeria government to be weary or at alert.
*6.0. GOING FORWARD – SUGGESTIONS* :
From the periphery and in short terms approach, the China-Nigeria currency swap deal has the potential to enhance trade and investment between the two nations, but with a deeper, critical look into and reasoning, it is also poses some challenges and risks that need to be carefully reevaluated and managed.
As a federal republic, understanding the advantages and disadvantages of the swap deal deeply, so as to maximize its benefits while minimizing its drawbacks, especially, on interim measure.
On a note of caution, the implications of the currency swap deal under the prevailing circumstance where the Nigerian government has borrowed heavily from the Chinese government, without adequately servicing the loan interests or repaying the accumulated loans, which are significant and far-reaching, this has a yet to be evaluated consequences, as mention above.
For emphasis sake, the Center wish to reiterate that, the currency swap deal may provide temporary relief, but it does not address the underlying issues of debt sustainability and dependence on Chinese funding. Nigeria needs to carefully consider the potential risks and implications of the deal and develop a comprehensive strategy to manage its debt and promote economic development.
The Center is also of the opinion that, by taking these suggested steps, Nigeria can mitigate the challenges posed by the currency swap deal and promote its active participation and activities in the AfCFTA implementation.
Here again, giving the present scenario i.e., embarking on a currency swap deal policy with the Chinese amidst unpaid loans and inadequately serviced loans interests amounting to billions of naira/dollars in the outstanding, this modest simply serves as an earlier pointer in what looks like, Nigeria heading the path of a subtle resources mortgage.
In the spirit of preserving the nationhood, those in authority are hereby encouraged to make public, by publishing all contracts deals conditions and terms, so that, Nigerians who will eventually bear the blunt when the chips are down, can make in puts before hand through their legislatures ( parliament representatives).
On this note, the Center wishes to urge the law makers to have a review of this swap deal policy and ensure that necessary legislative frameworks are provided to guide this policy implementation, for the sake of safeguarding the future, most importantly, ensuring the establishment of an internal payments and settlement systems in this regards.
Finally, looking into the future, possible consequences are still avoidable, if the government will approach this deal with deeper reconsideration for nationhood sake.
Compliments of the season to all Nigerians.
• Fwdr Nweke Rff is Head Of Research, Sea Empowerment Research Center RGT
* Concluded .
3.0. LIKELY CHALLENGES ARISING FROM THE CURRENCY SWAP DEAL IN THE FACE OF NIGERIA’S PARTICIPATION IN THE IMPLEMENTATION OF THE AFRICAN CONTINENTAL FREE TRADE AGREEMENTS – AfCFTA.
The currency swap deal between Nigeria and China may pose several challenges for Nigeria’s active participation and activities in the Africa Continental Free Trade Area (AfCFTA) implementation. Some of these challenges include:
3.1. Dependence on Chinese Currency:
The currency swap deal may increase Nigeria’s dependence on the Chinese yuan, which could limit the country’s ability to participate fully in the AfCFTA. The AfCFTA aims to promote the use of African currencies and reduce dependence on foreign currencies, but the currency swap deal may undermine this objective.
*3.2 Limited Trade With Other African Countries:* The currency swap deal may focus primarily on trade between Nigeria and China, which could limit Nigeria’s trade with other African countries. This could undermine the AfCFTA’s objective of promoting intra-African trade and economic integration.
3.3. Competition From Chinese Goods: The currency swap deal may make it easier for Chinese goods to enter the Nigerian market, which could lead to increased competition for Nigerian businesses. This could undermine the AfCFTA’s objective of promoting African businesses and industries.
3..4 Tariff and Non-Tariff Barriers: The currency swap deal may not address the tariff and non-tariff barriers that exist between Nigeria and other African countries. The AfCFTA aims to eliminate these barriers, but the currency swap deal may not provide a solution to this challenge.
3.5 Regulatory Framework: The currency swap deal may require Nigeria to adopt regulatory frameworks that are compatible with Chinese regulations, which could create challenges for Nigeria’s participation in the AfCFTA. The AfCFTA requires member states to adopt common regulatory frameworks, but the currency swap deal may create inconsistencies.
3.6 Payment and Settlement Systems: The currency swap deal may require Nigeria to adopt payment and settlement systems that are compatible with Chinese systems, which could create challenges for Nigeria’s participation in the AfCFTA. The AfCFTA aims to promote the use of African payment and settlement systems, but the currency swap deal may undermine this objective.
3.7. Currency Fluctuations: The currency swap deal may expose Nigeria to currency fluctuations, which could affect the country’s trade with other African countries. The AfCFTA aims to promote stability and predictability in trade, but the currency swap deal may create uncertainty.
3.8. Limited Access to African Markets: The currency swap deal may limit Nigeria’s access to African markets, as the deal may focus primarily on trade with China. The AfCFTA aims to promote access to African markets, but the currency swap deal may undermine this objective.
3.9. Inconsistent Trade Policies: The currency swap deal may create inconsistent trade policies, as Nigeria may be required to adopt policies that are compatible with Chinese policies, which could create challenges for the country’s participation in the AfCFTA. The AfCFTA requires member states to adopt common trade policies, but the currency swap deal may create inconsistencies.
3.10. Monitoring and Evaluation: The currency swap deal may require Nigeria to adopt monitoring and evaluation frameworks that are compatible with Chinese frameworks, which could create challenges for Nigeria’s participation in the AfCFTA. The AfCFTA aims to promote transparency and accountability, but the currency swap deal may undermine this objective.
4.0. NEED FOR NIGERIA TO MITIGATE THESE CHALLENGES:
To mitigate these challenges, Nigeria may need to:
4.1. Diversify Its Trade Relationships: Nigeria should diversify its trade relationships to reduce its dependence on China and promote trade with other African countries.
4.2.Develop a Comprehensive Trade Policy: Nigeria should develop a comprehensive trade policy that is consistent with the AfCFTA and promotes the country’s participation in the agreement.
4.3. Strengthen Its Regulatory Framework: Nigeria should strengthen its regulatory framework to ensure that it is consistent with the AfCFTA and promotes the country’s participation in the agreement.
4.4. Promote The Use Of African Currencies: Nigeria should promote the use of African currencies, such as the Nigerian naira, to reduce dependence on foreign currencies and promote intra-African trade.
4.5. Develop a Payment And Settlement System: Nigeria should develop a payment and settlement system that is compatible with African systems and promotes the country’s participation in the AfCFTA.
5.0. NEED TO LEARN AND UNDERSTUDY THE LESSONS AND EXPERIENCES OF AFRICAN COUNTRIES WHO ARE NOW VICTIMS OF THE CHINESE UNPAID LOANS AND BUSINESS DEALS/ AGREEMENTS:
The Center wishes to note that, it’s no secret that China has been investing heavily in various countries around the world, particularly in Africa, through its *Belt and Road Initiative.
However, what is not always clear is what happens when these countries struggle to repay their loans.
Unfortunately, it has become increasingly common for China to take control of economic resources and infrastructures in these countries as a way to recoup its investments.
In specific terms, let us take a look at some of the countries that have found themselves in this situation:
Firstly, is *Angola*, it owes China a whopping $25 billion, and as a result, China has gained significant control over Angola’s oil industry.
second is *Kenya* another country presently, struggling to repay its loans, and China has taken control of its *Standard Gauge Railway* project.
Third, is *Sri Lanka* has also had to hand over control of its *Hambantota port* to China due to debt repayment issues.
Other countries that have had to cede control of their economic resources and infrastructures to China include *Djibouti*, which has had to give China control of its *Doraleh Container Terminal*, and *Uganda*, which has had to hand over control of its *Entebbe International Airport*. *Zambia* has also had to give China control of its *Kenneth Kaunda International Airport*, and *Nigeria* has had to tacitly cede control of its *Lekki Deep Sea Port* in same regards via share interest stakes (as published Chinese has the highest share in the Concession deal).
It’s worth noting that these takeovers are often the result of *debt-for-equity swaps*, where China agrees to cancel some of the debt owed by the country in exchange for control of strategic assets. This can be a contentious issue, as it often involves China gaining control of critical infrastructure and resources in the country.
According to various reports, at least *10 African countries* are at risk of having their economic resources and infrastructures taken over by China due to debt repayment issues. These countries include *Republic of Congo*, *Sudan*, *Cameroon*, *Ghana*, and *Democratic Republic of Congo*, among others.
This calls on Nigeria government to be weary or at alert.
*6.0. GOING FORWARD – SUGGESTIONS* :
From the periphery and in short terms approach, the China-Nigeria currency swap deal has the potential to enhance trade and investment between the two nations, but with a deeper, critical look into and reasoning, it is also poses some challenges and risks that need to be carefully reevaluated and managed.
As a federal republic, understanding the advantages and disadvantages of the swap deal deeply, so as to maximize its benefits while minimizing its drawbacks, especially, on interim measure.
On a note of caution, the implications of the currency swap deal under the prevailing circumstance where the Nigerian government has borrowed heavily from the Chinese government, without adequately servicing the loan interests or repaying the accumulated loans, which are significant and far-reaching, this has a yet to be evaluated consequences, as mention above.
For emphasis sake, the Center wish to reiterate that, the currency swap deal may provide temporary relief, but it does not address the underlying issues of debt sustainability and dependence on Chinese funding. Nigeria needs to carefully consider the potential risks and implications of the deal and develop a comprehensive strategy to manage its debt and promote economic development.
The Center is also of the opinion that, by taking these suggested steps, Nigeria can mitigate the challenges posed by the currency swap deal and promote its active participation and activities in the AfCFTA implementation.
Here again, giving the present scenario i.e., embarking on a currency swap deal policy with the Chinese amidst unpaid loans and inadequately serviced loans interests amounting to billions of naira/dollars in the outstanding, this modest simply serves as an earlier pointer in what looks like, Nigeria heading the path of a subtle resources mortgage.
In the spirit of preserving the nationhood, those in authority are hereby encouraged to make public, by publishing all contracts deals conditions and terms, so that, Nigerians who will eventually bear the blunt when the chips are down, can make in puts before hand through their legislatures ( parliament representatives).
On this note, the Center wishes to urge the law makers to have a review of this swap deal policy and ensure that necessary legislative frameworks are provided to guide this policy implementation, for the sake of safeguarding the future, most importantly, ensuring the establishment of an internal payments and settlement systems in this regards.
Finally, looking into the future, possible consequences are still avoidable, if the government will approach this deal with deeper reconsideration for nationhood sake.
Compliments of the season to all Nigerians.
• Fwdr Nweke Rff is Head Of Research, Sea Empowerment Research Center RGT
* Concluded .
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