October 19, 2018

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Nigeria criticised for China currency agreement

Nigeria criticised for China currency agreement

Strategists are criticizing Nigeria’s latest plan to rescue its currency — this time by relying on Chinese cash.

On a visit to Beijing last month, President Muhammadu Buhari signed a currency agreement aimed at encouraging trade with China and reducing Nigeria’s demand for dollars to relieve pressure on its dwindling foreign reserves.

While the deal, details of which are still being negotiated, helps China’s push into Africa’s largest economy, it will buy Nigeria a few months, at most, before it’s forced to follow the lead of other oil exporters and devalue, according to Citigroup Inc. and Bank of America Corp.

The naira-yuan swap agreement is “very unlikely” to relieve pressure on the naira or Nigeria’s reserves, said Andrew Howell, a New York-based frontier-markets strategist at Citigroup, the world’s biggest foreign-exchange trader. “The market wants to see a clear path toward achieving a sustainable exchange rate, where supply and demand for foreign exchange are balanced.” Read more

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