China to Establish Banks in Nigeria – In the Digital Currency Era, It May Be The Game Changer

For years, Chinese businesses in Nigeria have been significant with construction, technology and clothing. But that’s about to change as the world’s second-largest economy is moving to establish its presence in the Nigerian banking industry.

Cui Jianchin, the Chinese Ambassador to Nigeria, says he is in talks with Chinese-owned banks to establish operations in Nigeria, NAN reports.

“Before my departure from Beijing to Abuja, I talked to several banks in China. When you list the world’s 10 big banks, six are in China. The banking sector is very important because, without money, we cannot build our industries,” Mr Jianchin explained. “What I am thinking here is best to talk to the governor of the central bank, and how we can allow the Chinese banks to run office here and now, they are doing the feasibility studies on that”.

This, the envoy said, would boost Nigeria’s economy and expand trade relations between the two nations.

Mr Jianchin disclosed this on Tuesday in Abuja while addressing journalists during the commemoration of the 2021 Chinese Moon Festival and China-Nigeria Cultural week.

He explained that establishing Chinese banks in the country would also be a point of discussion during the China-Nigeria Binational Committee meeting.

“I am working hard that in the binational meeting, I hope we can make a big decision and give a big push to let the banking industry and insurance industry because financial integration and institutions are key,” Mr Jianchin added. “If you go to China, you will find our banking industry is very powerful, not only for business but a change in the way of life.

Extolling the extant China-Nigeria trade relations, the Chinese ambassador noted that the trade volume between China and Nigeria was nearly $20 billion, increasing from 2020’s $19.2 billion.

However, China’s move to add banking to its menu of businesses in Nigeria has come at a time when the Central Bank of Nigeria (CBN) is moving to establish the Nigerian International Financial Centre (NIFC), in a bid to put Nigerian banks in a global spot.

The last time China made attempt to get into Nigeria’s financial market was in 2018, when the Asian giant made a currency swap agreement with Nigeria to finance trade and investment between both countries.

The currency swap agreement was designed to facilitate trade transactions between China and Nigeria and remove the need to use the US dollar in between the two countries’ currencies. The deal had a three year tenor that allows CBN and the Peoples Bank of China (PBoC) to swap a maximum of 15 billion yuan for N720 billion. However, the three years tenor has passed and the deal is yet to materialize, killing the prospect of facilitating easier financial transactions between Nigeria and China.

But a lot has changed in the financial world since 2018 when the deal was struck, creating a path that may help Nigeria and China to strike a fresh attainable deal.

With the fintech boom, whose innovation has paved the way for partnership deals between Nigerian and Chinese payment companies, the cross-border bottlenecks have been largely overcome. But there is more. China and Nigeria are on a race to start using central bank digital currencies (CBDC), with Nigeria scheduled to launch its digital currency, the E-naira by October 1, and China, on the verge of conducting final tests for its CBDC, E-yuan.

The two countries have shunned cryptocurrencies, seeking to use their central banks-backed digital currencies as alternative. This means, China establishing banks in Nigeria may help both countries to facilitate dollar-free financial transactions, swapping their digital currencies.