3rd March, 2012
To boost bilateral trade between Nigeria and China, Nigeria’s central bank has added the equivalent of $500 million in Chinese yuan to its reserves and plans to buy seven times that amount, the Wall Street Journal has reported.
The bank will gradually increase its yuan holdings to 10% of its $35 billion in reserves, Central Bank of Nigeria Gov. Sanusi Lamido Sanusi said in an interview.
Over the past six months Nigeria has converted 1.4% of its reserves to Chinese currency, largely by selling euros and buying yuan on offshore markets in Hong Kong, Mr. Sanusi said. He said he plans to increase that amount by selling much of the bank’s euro holdings and buying more yuan directly from the People’s Bank of China.
Nigeria is courting China as a customer for its vast oil reserves, and Beijing recently invested in Nigeria-based rice processing plants and airport development projects, Mr. Sanusi said.
“As those kind of relationships improve, holding yuan would be very important,” Mr. Sanusi said. He added that U.S. dollars would continue to make up the bulk of the bank’s reserves.
Other African countries aren’t likely to follow Nigeria’s lead until China’s currency—still not freely convertible—is more readily available on the open market, economists say.
“It is likely that we will see interest from the oil producers with larger external reserves first,” said Razia Khan, head of Africa research for Standard Chartered Bank in London. “I am guessing it is a trend that will become far more important than it is currently, especially if China takes steps towards currency convertibility as has been hinted by 2015.”
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