The Group Managing Director of Red Star, one of Nigeria’s logistics company, has commended the Federal Government of Nigeria for its currency swap policy of Naira to Yuan, pointing out that this will help boost the logistics industry, as well as other sectors of the economy. He stated this at the just concluded Institute of Directors’ 2016 ADC conference in Abuja.
Speaking recently at an interview session the Group Managing Director of Red Star Express, Mr Sule Bichi, explained that the swap is a smart idea simply because a large chunk of the Nigeria’s import comes from China and South East Asia. “The swap is a smart idea simply because a large chunk of the Nigeria’s import comes from China and South East Asia, so if we can eliminate changing our naira to dollars or pounds sterling and using the Yuan as a means of transaction with the Chinese, this will reduce our cost. What we want is the availability. Nigerian banks can open letters of credit denominated in the Chinese currency, it cuts the third party currency exchange requirement and the cost of transaction will be lower”, he noted.
The Managing Director who recently emerged as one of the top 25 CEOs whose stock did exceptionally well on the stock market last year disclosed that the scarcity of foreign exchange at this period has even necessitated the deal because it will open up business between the two countries and stimulate movements from China easily while eliminating the third party currency that has made procurement of raw materials from different destinations a hard nut to crack.
“China remains the top import location for Nigeria in the past 10 years. Chinese companies can get their materials from Nigeria and we can easily get our materials from China. This will help the economy to come up. China is a major buyer of our crude oil and with that, the exchange is even further facilitated. So the logistics side of it is that once there are things to move, then the logistics industry will receive a boost. That is when the market will have an improvement”, he stated.
Bichi also noted that the courier and logistics industry in Nigeria use, to a large extent products from China and other parts of South East Asia for its consumables and work materials. “For example, most of the motorbikes that are used now in Nigeria, especially for courier business are coming from South East Asia, with most of them produced in China. Secondly, even the common materials used in the industry like flyers and bar-coded airway bills mostly come from China. So the availability of the Yuan will make it easy to bypass the dollar and we can purchase the materials directly”.
This, he said has doubled the cost of delivering international packages and also compounded the challenges faced by most companies as they grapple with the dilemma of making a decision whether to pass the seemingly additional costs to clients or continue to bear the sudden increase in operation cost.
“If you look at the import into Nigeria in the last six months and compare with the same period last year, you will see that it has dropped by almost 50%. So there are fewer things to move. Even the ports, both sea and air, are no longer as congested as they use to be. Our foreign exchange earnings have dropped, exchange rate has gone up and we now have imported inflation”, he noted.