• AreaGist



    display this

    display this
    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.

    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.

    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;

    Click here to read more

    display this
  • Follow us on twitter

  • [supsystic-gallery id=2]


    by AG | Feb 25,2017

    epl theme

    With 25 matches already played, this weekend we will be witnessing another thrilling episode of the English Premiers League.

    All game today starts by 4 PM Nigerian time, and in the first fixture, Crystal Palace would host Middlesbrough. The host who are already up for relegation will hope to over turn their fate with a win against 16th place visitors.

    Similarly, League leaders Chelsea FC will proof if they are worthy of the title when they play host to Swansea by 4pm. The game between the Swans and the Blues will be a major boost for any side that wins. While Chelsea who drew last week with Burnley will be hoping to extend their lead to 11 points, struggling Swansea will be praying they grab a win or at least a draw.

    Chelsea will go into the game with full house, as there are no current injury scares.

    Also in the day, Everton will host Sunderland, Hull City against Burnley and Westbrom against AFC Bournemouth.

    The game between Arsenal and Southampton will not hold, likewise the Sunday fixture between Manchester City and Manchester UTD.  The reason for the postponement of the game is to enable Manchester United play their EFL cup finals against Southampton.

    Leicester City who recently sacked their coach, Claudio Ranieri over the week will host Liverpool FC, late Monday night.

    epl week 26

    Leave a Reply here ( use your social profile below to ensure immediate appearance of your comment)



  • Recent Posts