China Export & Credit Insurance Corporation also known as Sinosure a provider of export credit insurance for the export of high-value added goods in China has blacklisted Nigeria on account of the difficult foreign exchange environment in the country , according to a person with knowledge of the matter.
Sinosure joins the growing list of international investors and companies increasingly isolating Africa’s biggest oil producer and economy on account of the Central Bank of Nigeria’s (CBN) unorthodox monetary policy, which some businesses have blamed for a dollar shortage in the country.
“Sinosure has informed its customers that they won’t accept to do business with Nigeria for now, given the exchange shortage issues,” the source said on condition of anonymity.
“Many Chinese suppliers like Shandong (big MSG co) were working with them and will have to find another export insurance company.”
Trade between Nigeria and China increased to $19.6 billion at the end of 2014 from $500 million in 2000, according to data compiled by Bloomberg.
Three-quarters of bilateral trade between both countries consists of imports to Nigeria.
The CBN started managing the naira at N197-N199 per dollar in March 2015 as oil prices which funds over 90 percent of dollar earnings tumbled more than 40 percent.
Nigeria’s foreign exchange reserves have dropped 33 percent to $27.8 billion as at February 12, 2016 from about $40 billion in January 2014.
The naira hit a record low of N340 to the dollar on the parallel market on Friday, as importers desperate to meet their obligations scrambled for dollars.
Standard Chartered Bank in a February 8 report suggested that Nigerian domestic prices continue to be pressured higher, despite official attempts to hold the interbank USD-NGN rate steady, raising questions about monetary policy credibility.
“Although an important part of the rationale for resisting an official devaluation is to keep fuel prices and inflation, the evidence from our Standard Chartered-Premise Consumer Price Tracker (SC-PCPT) suggests that the parallel market FX rate may be playing a more important role in the determination of overall prices in Nigeria,” Razia Khan, Standard Chartered Bank’s chief economist for Africa, and author of the report said.
“Notwithstanding the weak growth backdrop, this may feed into greater price pressures. Monetary policy is poorly equipped to respond.”
BusinessDay reported exclusively yesterday, the regulator was considering a two-tier FX regime for Nigeria that would enable more flexible trading of the naira at a lower band for most foreign investors, institutional players and importers.
The move by Sinosure will add to pressure on the CBN to evolve a new exchange rate policy for Nigeria.
Bloomberg reported last week that UBS Group, AG ceased its fixed-income research coverage of Nigeria’s banks, citing a lack of liquidity in their Eurobonds,
JPMorgan Chase & Co. removed Nigeria from its local-currency emerging-market bond indexes, tracked by more than $200 billion of funds, in September, because of Central Bank curbs on currency trading that made it difficult for foreign investors to buy and sell naira debt.
Barclays Plc followed suit about two months later with its equivalent bond index.
Sinosure a major Chinese state owned enterprise was established in 2001.
Financing since 2001 has totalled $290 billion worth of exports and investments, and 570 billion Yuan of lending.
In 2009 alone, the company insured $116 billion worth of exports.
Sinosure’s main products include Medium- and Long-Term Export Credit Insurance, Overseas Investment (Leasing) Insurance, Short-Term Export Credit Insurance, Inbound Investment Insurance, Domestic Trade Credit Insurance, Bonds and Guarantees concerning foreign trade and reinsurance concerning credit insurance.
PATRICK ATUANYA
