|Nigeria recently signed a currency swap agreement with China. This is the Federal Government bid to manage the exchange rate crisis and reduce the strain on the Naira due to the rising exchange rate in relation to the dollar. China is one of the biggest exporters to Nigeria and make up more than 70% of Nigeria’s imports. In lay-man terms, Nigerians will not need to use dollars when doing business with the Chinese but can use yuan directly. It is expected to reduce the demand for dollar and in the long run strengthen the Naira.
Since 2014 when Yuan was recognised as a likely global reserve currency, Ghana, South Africa, Malaysia, South Korea and Zimbabwe have integrated the currency into their financial markets. The Naira will be joining other currencies which directly currently trade with the Yuan like the dollar, euro, yen, pound, the Australian Aussie, the New Zealand dollar, Russia’s rouble, Swiss francs, the Singaporean dollar and the Malaysian ringgit.
Protagonists are of the opinion that this will strengthen the economy and increase the growth of businesses ad investments in the country while antagonists believe that this will open the economy a lot more than necessary to the Chinese leading to an over-flooding of Chinese goods and services to the detriment of locally produced goods and services.
How does this affect the real estate industry? Some of the materials used in construction, design, fittings, home accessories are imported from China. With the use of yuan, there will be a noticeable reduction in the cost of building. But care needs to be taken that high standards are upheld and enforced.