Oil Exports Earnings In Chinese Yuan: Stemming The Troubles Ahead

NIgeria is to earn her oil exports in Chinese Yuan. This is fallout of an agreement reached by Nigeria and China. She is expected to keep between 5-10% of her foreign export earnings in the Chinese currency. It is reported by the Central Bank Governor, Mr. Sanusi Lamido Sanusi that Nigeria is seriously considering the Yuan officially saying that the Chinese Yuan is after all, already being exchanged in the country.

It is argued by experts that the said decision will help diversify the country’s external reserves from the U.S. dollar and as well benefit portfolio managers and will act as a store of value.

Increasing fears about the emergence of China and US dominance has been allayed by the potential of the relationship which seems a rivalry. Optimists see the relationship of both as a form of symbiosis. It is argued that China needs the U.S. market to grow fast enough, around 8 percent in order to ensure political stability While America needs Chinese goods to buy cheap at Wal-Mart and Chinese credit to fund hurting deficits worsened by political stagnation.

But we cannot evade the fears and doubts that are situated in such relationships. This has led analysts to posit that it can distort our relationship with US, constitute about 36% of Nigeria’s oil export.

Domiciling Nigeria’s oil export earning in China Yuan raises up the issue of China’s stability. It is noted that local tensions persist and so does it flagrant abuse of human right. This is further compounded by China’s gradually ageing population as the ratio of Chinese workers to dependant is expected to stop rising and start falling. The frightening unknown is if the Chinese leadership can show skill in maintaining domestic stability. Should we gamble with this?

Also, China’s failed railroad project and manipulation of her Yuan leaves a huge dent on her credibility to lead the world. We are worried about all this and the potential distortion it’s portends for our fragile economy.

While we appreciate China’s infrastructure-for-resource model, we think it is too early to take this decision. Even the Chinese businessmen in Nigeria still do many transactions in dollars. There is a populist criticism for the valuation of the Yuan and also the push for its revaluation. Our fears lie in this haste to keep our oil earnings in Yuan.  It is this we want the authorities to look into again and also make consideration for other currencies like the Swiss franc.