Naira Now Approved for Trade Transaction Payment in the UK
- Naira has joined the list of other currencies approved for financing transactions with Britain
- The move follows the adoption of the floating rate announced by the Central Bank of Nigeria
- Analysts warn that this may increase the responsibility of the country when trade mature
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Nigeria's naira is now part of pre-approved currencies for financing transactions, the United Kingdom has announced.
This is coming after Nigeria's central bank abolished the country's multiple exchange rate system and effectively floated the naira.
The Export Finance Agency of the United Kingdom (UK) said the new development will make it possible for the country to offer financing for deals with Nigerian companies denominated in local money.
Source: UGC
According to the agency, the naira will join the list of three West African currencies that have been given the go-ahead to be used as payment for transactions that advance commerce with Britain.
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Meanwhile, some analysts have reacted favorably to the naira's inclusion in the funding scheme because they see advantages for the local currency and a good impact on Nigeria's trade environment.
UK cherishes its relationship with Nigeria
Paul Arkwright, British High Commissioner to Nigeria, said the development is an indication of how the UK cherishes its relationship with Nigeria, adding that the decision will solidify ground for increase in investment and trade in both countries.
According to The Nation, Arkwright said that it will lay a solid platform for a sharp rise in commerce and investment between the two nations.
For projects with at least 20% British content, the UK said it will provide funding support under the initiative, contributing up to 85% of the necessary money.
The availability of a UK government-backed guarantee distinguishes this financing alternative, guaranteeing that Nigerian businesses that choose loans in their local currency have improved security.
Analysts hailed the financing option's effect on the local currency, but they cautioned that it would increase Nigeria's responsibility when trades mature for settlement. They also questioned the rate at which money would be dispersed given that local interest rates are in the high double digits.
In a related news, Legit.ng reported that Wema Bank and other Nigerian banks have lifted the suspension of international transactions on naira cards.
In an email, the bank said it imposed a $500 monthly limit on international transactions using naira cards.
This is generally regarded as a welcomed development following the foreign exchange pressure which led banks to suspend their international transaction on naira card some months ago.
Reacting to this, Olumide Adesina, a financial analyst in a note to Legit.ng said the move by the bank is an adjustment to the current realities of a market determined rate.
He said:
That shows the reality about the floating on the naira as market forces determine the exchange rate. However, that could sustain more pressure as backlogs remain coupled with the inaccessibility of the Investors and Exporters Window like in the case of Oil Marketers.
Nigeria’s foreign reserves tumbles to lowest level in 2 years
Meanwhile, Legit.ng earlier reported that Nigeria’s foreign reserves which gives the Central Bank of Nigeria (CBN) the firepower to defend the naira has declined to two-year low.
According to the latest data obtained from CBN's website, Nigeria's foreign reserves dropped to $33.98 billion Wednesday, July 19th, 2023.
Source: Legit.ng
