The possibility of Nigeria signing a currency swap deal with South Africa is seen to enhance flow by at least 50 percent to $4 billion.
The Swap arrangement is estimated to be in the region of $1 billion over three years, according to Bismarck Rewane, managing director/CEO at Financial Derivatives Company.
Rewane spoke in Lagos at Nigerian –South African chamber of commerce breakfast meeting organised by Rand Merchant Bank Nigeria in commemoration of its 5th year celebrations.
Speaking on the topic, Enhancing South Africa-Nigeria Trade opportunities: the case for a ZAR/NGN swap, Rewane who was the guest speaker identified weak institutions, political environment, border charges and customs logistics, tax and legal, and security issues as constraints to Nigeria-South Africa trade.
He was concerned that both countries are yet to sign the African Continental Free Trade Agreement (AfCFTA), adding that Bilateral trade will improve trade ties and encourage movement of goods and services, tourism, Ease pressure on external reserves, enhance infrastructural development and job creation.
Rewane has predicted that the coming year would be tougher than the present year even as he says that the Gross Domestic Product, GDP would be slow.
Rewane made these predictions at a June breakfast forum organised by Nigeria-South Africa chamber of commerce and sponsored by Rand Merchant Bank Nigeria Limited, RMB.
‘‘GDP growth trajectory will be slow, sustained and 2 percent to 2.5 percent average,’’ said Rewane. ‘2019 is going to be worse than 2018. Inflation is close to an inflection point- liquidity pressures.’’
He also disclosed that Nigeria and South Africa have a lot in common such that both countries recovered from a recession in Q2’17, both have their next elections in 2019, and non-convertible currencies
‘‘Nigeria and South Africa are the largest economies in Sub-Sahara Africa, account for 37 percent GDP, major exporters of 59.3 percent of total exports, major importers of 58.2 percent of total imports,’’ he said. ‘‘Any type of deal between Nigeria and South Africa will be useful.’’
According to Rewane, bilateral trade will improve trade ties, ease pressure on external reserves and enhance infrastructural development and job creation adding that both countries are yet to sign the African continent free trade Agreement.
‘‘It will enhance trade flows by at least 50 percent to $4bn and companies that play in Retail, Telecoms, power and entertainment will be key beneficiaries in the arrangement, easing demand pressure on both currencies,’’ he said. ‘‘Nigeria’s import bill is $32.7bn and the import from SA is only $1bn.’’
He listed Agriculture, trade, retail and infrastructure as sections that will drive growth in 2018-2019.
‘‘Agriculture supported by favourable government programs and import substitution, higher income levels will boost private consumption and domestic sales
‘‘Government revenue will remain robust thanks to oil proceeds and in pressure on the exchange rate will build up as we go towards election and we have to make decisions ASAP,’’ he said. ‘‘There may be temptation for political reasons to appreciate the currency.’’
