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    THE NIGERIA - CHINA FOREX DEAL EXPLAINED


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    Much has been said and celebrated this week about the Nigeria - China Forex deal, but much is undoubtedly yet to be understood about the deal leading to all sorts of interpretations and postulations from different school of thoughts on whether we should at all be celebrating or how loud we should indeed celebrate. As it turns, and like in all other issues 'Nigerian', the school is quite a large one, with discussion participants ranging from Market Women to Economic experts all expressing their opinions even before President Buhari and his team returned to Nigeria with details of the deal. To this end, we are going to attempt to throw some more light on this issue as we see it in the proceeding write up. Please note that this is a very simplified version of the story, brought down to level of the man in the streets. Also note that the figures used here are not the exact rates, but convenient approximations for ease of calculations so as to drive the important points home.

    HOW CURRENCY EXCHANGE WORKS
    For international transaction between two countries to work, there must be a mechanism for the two different to exchange their currencies via their Central Banks to settle the transactions .e.g. if Nigeria buys 600 Chinese Yuan worth of products from China and China buys N20 worth of products from Nigeria, it means currency has to be exchanged between these two parties at an exchange rate of 20 to 600, i.e. 2 to 60 or simply put, a ratio of N1 to Y30 .
    However, there are over 200 currencies in the world today and not every country has the wherewithal to do exchange settlements with every other 199 countries at the same time, most countries just cannot afford it. America is however big enough to do this so for countries who cannot afford it the dollar now becomes the standard international exchange currency. i.e. You can exchange your currency to the US Dollar, and then the US dollar can then be converted to any currency of your choice. This is essentially what is meant when we refer to the dollar as an international Medium of exchange.There are other internationally exchangeable currencies e.g. Euro, Pound etc but they are not as convertible as the dollar.

    Before now the Chinese currency (Yuan) was not easily convertible to the Naira because both countries' Central Banks do not store their reserves in each others currency, thus the only way to transact between China and Nigeria was to first convert either currencies to the dollar. In line with this,facts recently made available showed that 70% of the Nigerian demand for the dollar was to convert eventually to the Yuan to conclude transactions between Nigeria and China. This multiple currency conversions inflates currency price due to what economics call TRANSACTIONAL COSTs .e.g. The bank has to make profit,the Nigerian selling to the black marketers has to make profit and also the black market sellers have to make their profit. This is further complicated by demand,supply and availability issues, adding to the cost of exchange rate.

    THE ADVANTAGE OF THE NEW DEAL
    With this recent agreement between Nigeria and China, the Chinese currency and Nigerian currencies are now directly inter-convertible via their central banks, meaning Nigeria will make Naira available to the Chinese central bank and vice versa. This will enable Nigeria and Chinese business men and women trade together easily knowing their governments will settle the transaction using the prevailing exchange rate. Thanks to this , the cost of converting from the naira to the yuan will no longer be impacted by transactional cost of passing through an intermediary currency - the dollar. This means that it will now be cheaper to convert from naira to yuan.
    For example, prices listed on a popular Chinese trading portal, which quotes the price of goods in both yuan and US dollar, shows a particular leather Handbag quoted as 297yuan or 46dollars, this shows that the dollar exchanges for about 6.5 yuan. Therefore, a Nigerian who wants to buy this bag now has the option to pay in dollars or pay in yuan with varying consequences as follows;


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  • MEDICAL SALES REPRESENTATIVE NEEDED URGENTLY IN A PHARMACEUTICAL COMPANY

    by AG | Feb 10,2017

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    A leading business conglomerate in Nigeria with business interest in the Pharmaceuticals industry is in need of smart, disciplined goal getter for immediate employment. Position: Medical Sales Representative Location: Every state capital in Nigeria Requirement: interested applicants must have: A passion for sales job and possess innate salesman ability A zeal to work tirelessly and […]

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    DRIVERS NEEDED AT GERMAN EMBASSY IN ABUJA

    by AG | Feb 10,2017

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    The German Embassy in Abuja is seeking to recruit a full time (40 hours/week) and two part time (20 hours per week) to join the embassy team as soon as possible. The job position is would be limited for the period of 12 months. Duties and responsibilities Transport of staff members , officials visitors and […]

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    FINANCE AND ADMINISTRATION DIRECTOR NEEDED AT WEWE

    by AG | Feb 10,2017

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    Widows and Orphans Empowerment Organization (WEWE) is a reputable indigenous national Non Governmental Organization implementing a comprehensive USAID-funded Orphans and Vulnerable Children (OVC) Project titled local Partners Initiative  for Orphans and Vulnerable Children in Nigeria (LOPIN2). We are currently in need of qualified candidate to occupy the position of a Finance and Administration Director. How […]

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    VACANCY AT SPA LAGOS

    by AG | Feb 10,2017

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    A graduate capable of supervising a saloon/spa with computer knowledge and good English spoken English is needed at Beauty Heaven. Interested applicants should send their CVs to beautyheaven@gmail.com on or before February 14th 2017. For more details call 0903134615 or see the Guardian Nigeria, Thursday February 9, 2017 (pg i ) edition.

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    TWO JOB OPENINGS IN AN IT FIRM

    by AG | Feb 10,2017

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    A top notch IT products and services firm, offering business IT based solutions in the form of  comprehensive software for organization with focus of on Education, Retail and Health wellness is in need if the following; Business Solutions Sales Executive As the business solutions sales executive, you will be responsible for selling mobile/web applications to […]

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    N300BN UNPAID DEBT – AMCON TAKES OVER ARIK AIR.

    by AG | Feb 10,2017

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    The Federal Government, through the Asset Management Corporation of Nigeria, yesterday, took over the operations of the nation’s biggest carrier, Arik Air, and appointed Capt. Roy Ukpebo Ilegbodu as its new manager. Arik Air had been indebted up to the tune of over N300bn, owning AMCON alone N135bn. Similarly, Arik reportedly owes aviation fuel suppliers, […]

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    ELECTRICITY GENERATION INCREASES IN FEBRUARY

    by AG | Feb 09,2017


    Latest data obtained on the Power sector on Wednesday in Abuja reveals that the generation of electricity as at Tuesday February 4, peaked at 3,730.5 megabytes. This is largely due to the gradual decline in the spate of gas pipeline vandalism. The Minister of Power, Works and Housing, Babatunde Fashola, confirmed this at an event […]

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    YOU ARE A SNAKE UNWORTHY OF TRUST – JAPHET OMOJUWA BLASTS LINDA IKEJI

    by AG | Feb 06,2017

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    Friendship has gone sour for Linda Ikeji and co blogger, Japheth Omojuwa, as the later on Monday called out of the former; accusing her of sharing a personal story he told her with the purpose of shading him. Omojuwa in a series of tweets on Monday, accused Linda Ikeji publishing the story of his friend […]

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    APPLE TO INVEST BIG IN INDIA

    by AG | Feb 04,2017

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    Apple is expanding its base this year, with the establishment of an assembly plant in India. A local government official disclosed on Feb 3, that the company seeks to tap into a booming middle class while sales in China slow. Similarly, Karnataka’s IT minister said Apple had agreed to assemble its hugely popular phones in […]

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    NERGP TO KICK OFF BEFORE FEBRUARY ENDING

    by AG | Feb 04,2017

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    Presidency yesterday revealed that the much-anticipated Federal Government’s National Economic Recovery Growth Plan will be ready before the end of February. The program focuses on five broad areas namely: macroeconomic policy, economic diversification and growth drivers, competitiveness, social inclusion and jobs, and governance and other enablers. The Federal Government through the Government, through the plan, […]

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