The Nigerian Central Bank has announced that it’s going to convert roughly 10 percent of its $33 billion in foreign reserves from dollars into Chinese Yuan. Central Bank Governor Lamido Sanusi made the announcement this weekend in Bejing. The announcement is significant because Nigeria is the world’s top oil producer.
The amount to be converted, $3.3 billion, is not a great deal of money. But the decision reflects a global loss of confidence in the dollar relative to the Yuan, which is connected to a declining belief in US economic stability. It also shows that the Yuan is emerging to become an important global currency.
“I don't think the symbolism should be lost on anyone," says Razia Kahn economist at Standard Chartered-Bank. “The fact that you have a major African oil producer saying we're going to diversify our reserves has a significance that can't be ignored. It's a goodwill gesture in the hope that it will lead to more Chinese investment in Nigeria."
The bank is expected t have a currency swap with China, which allows the country to do more business in Nigeria with its own currency, instead of converting to dollars.