The United Kingdom (UK) will include the Nigerian naira in its list of “pre-approved currencies” for financing transactions, allowing the UK’s export finance agency to provide funding for deals with Nigerian businesses in local currency. The naira becomes one of three West African currencies pre-approved for trade financing transactions with Britain.
With Brexit prompting a reevaluation of trade ties, the UK aims to strengthen its relationship with Nigeria by offering financing options denominated in the local currency. This move is expected to encourage increased trade and investment between the two nations, as it provides a more convenient and favorable financing mechanism.
Under the arrangement, the UK will offer up to 85% of funding for projects with at least 20% British content. The financing structure for transactions in naira will mirror those in sterling, but with the added benefit of a UK government-backed guarantee for Nigerian firms obtaining loans in their local currency.
While analysts welcome the potential impact on the Nigerian economy, there are concerns about the country’s liability as trades mature for settlement. Additionally, the disbursement rate may be questioned, considering the high double-digit interest rates prevalent in Nigeria.
Opinion:
The inclusion of the naira in the UK’s “pre-approved currencies” is a significant step towards fostering stronger trade relations between the UK and Nigeria. By offering financing options in local currency, the UK demonstrates its commitment to supporting Nigerian businesses and promoting bilateral trade. However, it is essential for both parties to carefully assess the potential risks and benefits of this financing arrangement. Nigeria needs to manage its liabilities responsibly, ensuring that it can fulfill its financial obligations as trades mature. The disbursement process must also be efficient and transparent to facilitate smooth trade transactions. With proper management and collaboration, this financing opportunity can drive economic growth and mutually beneficial partnerships between the two nations.