Britain’s export finance agency has announced its inclusion of the naira as one of its “pre-approved currencies” for financing transactions, allowing Nigerian businesses to receive funding denominated in the local currency. This move makes the naira one of the three West African currencies eligible for the agency’s funding program, aimed at promoting trade between Britain and the region.
The decision comes as a result of Britain’s 2016 vote to leave the European Union, which prompted a reassessment of its trade relationships worldwide. Following an agreement reached between the United Kingdom and the EU in December, discussions on future trade ties have commenced.
According to Paul Arkwright, the British High Commissioner to Nigeria, this development highlights the importance the UK places on its relationship with Nigeria. It is expected to establish a solid foundation for a significant boost in trade and investment between the two countries, as stated in the credit agency’s official statement.
Under the financing structure, Nigerian firms seeking loans in the local currency will benefit from a UK government-backed guarantee, similar to those purchasing in sterling. While analysts acknowledge the positive impact this financing option may have on the local currency, they have expressed concerns regarding Nigeria’s liability as trades mature for settlement. Moreover, questions have been raised regarding the disbursement speed of funds, given the double-digit interest rates prevailing in the local market.