Paul Arkwright,  British High Commissioner to Nigeria Paul Arkwright, British High Commissioner to Nigeria News Agency of Nigeria (NAN)

UK Will Accept Naira in Transactions with Nigerian Businesses Featured

Business & Economy / Monday, 12 February 2018 05:22

Nigerian importers wanting to procure British made goods will now be able to pay in the Naira, Nigeria’s local currency. The decision credited to UK Department of International Trade, was the subject of a press release circulated by United Kingdom’s Export Finance (UKEF) to media houses in Nigeria late last week.

The statement disclosed that the structure for financing transactions in Naira will be of the same format as that availed to a conventional buyer requesting for credit in sterling or any other currency. The Naira will become one of three West African currencies that UK Export Finance has pre-approved for its programme of funding transactions that promote trade with Britain, the statement claimed.  Accordingly, the press release explained that the “UK government will now be able to support transactions in Naira for procurement of UK goods and services” The press statement indicated that the new initiative will  “enable Nigerian businesses to manage foreign exchange risks and, many times, to negotiate better terms with local banks.”

Paul Arkwright, British high commissioner to Nigeria described the new measure as  “ a clear indication of how much value the UK places on its relationship with Nigeria. It will provide a firm foundation for a significant increase in trade and investment between both countries,”  while Ben Ainsley, head of the department for international trade (DIT), Nigeria, said the agreement  was a feedback from the UK trade envoy’s visit to Nigeria in November.

The policy initiative seen in some quarters as part of a calibrated plan by the UK to expand its global trade network, as a result of Brexit, was welcomed with mixed feelings in Nigeria. While a number of financial analysts viewed the development as presenting a financing option for local currency holders, others are of the opinion that it will increase Nigeria’s liability as trades mature for settlement, and questioned the rate at which funds would be disbursed, since local interest rates are in high double-digits.

Bismark Rewane, head of Lagos-based consultancy Financial Derivatives said the financing deal with the UK would help local importers buy British goods. They had struggled to get foreign exchange at the peak of Nigeria’s currency crisis.

Severe dollar shortages in Nigeria in 2016 caused by lower oil prices forced the central bank to allow the Naira to float, after which it lost third of its official value. The naira has since traded within a range supported by the central bank on the interbank market.

“If I buy a Rover, the British government is now guaranteeing that I can pay in Naira, so the foreign exchange risk has been shifted from me to the Nigerian government,” Rewane said.
“If the Central Bank of Nigeria is unable to remit funds to the UK, then the liability will be on Nigeria.”

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