In this new post-Brexit referendum reality, the UK is looking for new and creative ways to encourage trade around the world.
Britain’s export finance agency, which works alongside the Department for International Trade, has announced it will add Nigerian currency Naira to its roster of “pre-approved currencies.”
“(This announcement) supports increased trade relationships between Nigeria and the UK,” Laure Beaufils, UK Deputy High Commissioner to Nigeria, told CNN.
This means the UK government can now give finance support to Nigerian businesses in local currency; they will be able to provide guarantees in Naira for Nigerian projects.
“If you are a Nigerian business based in Nigeria that wants to buy tractors in the UK – and the UK seller agrees to sell to you in Naira – then you as the buyer in Nigeria can go to your local bank in Nigeria get a loan. But you will say to your bank in Nigeria: “This loan is going to be backed by the British government.”
“That’s much more likely to get you a loan to start with, but also the loan is in Naira which means you are managing the foreign exchange risk. You don’t have to worry about fluctuations in the foreign exchange to repay your loan,” Beaufils told CNN.
The agency has a total limit of ￡750 million which it can provide. They can give 85% funding to businesses purchasing a minimum of 20% British content.
New trade frontiers
The UK voted to leave the European Union on June 23 2016 and, as a result, the government is pushing an agenda to increase exports into Africa.
Last year it was reported by The Times of London that Liam Fox, the international trade secretary, planned to build improved links with African commonwealth nations.
However, the reach of this particular policy remains to be seen.
“Ultimately, it will certainly help developing trade with the UK but it is likely to be a lengthy process,” Aurelian Mali, vice president and senior credit officer at Moody’s, told CNN.
In 2016 World Bank (2016) statistics showed Nigeria was Africa’s largest economy and is set to overtake the United States as the third most populous country by 2050.
Last year Nigeria emerged from recession, previously being hit hard by falling oil prices.
Naira becomes one of three West African currencies pre-approved by the British export finance agency.
According to the Observatory of Economic Complexity in 2015 China was the top origin of imports for Nigeria with a share of 35%. The UK was sixth, totaling 4.1%.
As Britain prepares leave the European Union, bolstering bilateral trade with countries like Nigeria could be increasingly on the cards.