Britain to add Nigeria's legal tender to list of accepted trade currencies

Britain’s export finance agency will add the

This, according to the export finance agency, will allow it to provide financing for transactions with Nigerian businesses denominated in the local currency.

Naira makes foreign entry

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.

“This is 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," Paul Arkwright, the British High Commissioner to Nigeria, said in the UK’s credit agency statement.

Britain voted in 2016 to leave the European Union, which has forced London to rethink its trade ties with the rest of the world. The United Kingdom and the EU struck an agreement in December that opened the way for talks on future trade ties.

The process

The UK export finance agency in its statement said the UK will provide up to 85 percent of funding for projects containing at least 20 percent British content.

The Naira financing will follow the same structure as a someone buying in sterling, except that Nigerian firms taking out a loan in the local currency can benefit from a UK government-backed guarantee.

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Analysts speak on the landmark

Already, analysts have welcomed the impact of the financing option on the local currency.

However, some of the analysts said it might 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.

The head of Lagos-based consultancy Financial Derivatives, Bismark Rewane, said the financing deal with the UK would help local importers buy British goods.

“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.”

In the last three years, severe Dollar shortages in Nigeria caused by lower oil prices forced the central bank to allow the Naira to float, after which it lost third of its official value.