Adding Value to Nigeria-China Currency Swap Deal

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For its special link to the Industrial and Commercial Bank of China (ICBC), Stanbic IBTC was chosen to lead the line with Zenith Bank, First Bank, and Standard Chartered Bank in the $2.5 billion currency swap deal between Nigeria and China. The deal has since taken off, but there is question about what value Stanbic IBTC has, as a correspondent bank, brought to the table. Kunle Aderinokun reports

When in 2017 the Central Bank of Nigeria announced the currency swap deal with China, four banks, Stanbic IBTC, Zenith Bank, First Bank, and Standard Chartered Bank, were chosen to act as settlement/correspondent banks for settling the trade transactions between importers and exporters from both countries. The deal was meant to ease the bottlenecks associated with trading with China using a third currency, the US dollar, to execute trades.

According to the CBN, the four banks were selected based on their footprints in mainland China. First Bank and Zenith Bank have representative offices in Beijing while Standard Chartered Bank and Stanbic IBTC already have operational offices in China. Stanbic IBTC, however, has a stronger footprint in China; it has a direct link with the Industrial and Commercial Bank of China (ICBC), the largest bank in the world, through its mother brand, Standard Bank of South Africa. ICBC owns a 20 per cent stake in Standard Bank while Standard Bank owns over 64 per cent of Stanbic IBTC, which is why Stanbic IBTC was chosen as a correspondent bank for the Chinese end.

Long before the CBN commenced sale of foreign exchange in the Chinese currency, the Yuan, in July 2018, the settlement banks had commenced a sensitisation drive and had invested in providing Nigerians and Chinese nationals, particularly importers and exporters, a better understanding of the framework and how the policy works. Particular focus has been on its possible impact on the Nigerian economy as well as the wider Africa-China trade ties. First Bank held the First Bank-Chinese forum while Stanbic IBTC organised the African-China sessions in line with its wider African reach, through the Standard Bank Group (SBG), and its global connections. Beyond the sessions, Stanbic IBTC has gone ahead to commission an African-China Banking Centre, the only one of the four banks to do so. The centre is equipped with mandarin resources to facilitate communication and drive the required linkages between Nigeria and China thereby making it easier for its clients to trade with the Asian giant. Stanbic IBTC said at the launch of the centre that it represented a critical opportunity to leverage the full potential of Africa’s and China’s rapidly evolving trade partnership.

Understandably, Stanbic IBTC continues to be more bullish in its sensitisation drive as well as in its efforts to facilitate stronger trade ties between Nigeria and China. Its African-China sessions, which it held in Lagos and Abuja, provided an auspicious platform to engage the Chinese business community on the bank’s role as a settlement/correspondent agent for implementation of the policy. Chief Executive of Stanbic IBTC Bank PLC, Demola Sogunle, noted the growing economic ties between China and Africa required players with the experience, expertise, reach and resources to help nurture the relationship and ensure its sustainability. A vehicle for this purpose already exists in the alliance of Industrial and Commercial Bank of China, Standard Bank and Stanbic IBTC, Sogunle noted. The ICBC-Standard Bank-Stanbic IBTC partnership boasts of a strategic synergy with enormous capacity to facilitate investment flows, trade and access between Africa and China, with Nigeria as a major benefactor.

Indeed, such benefits are beginning to play out with Nigerian businesses. The Standard Bank Group, which Stanbic IBTC belongs, late last year sponsored 61 entrepreneurs across Africa to the first China International Import Expo (CIIE) conference including six entrepreneurs/Stanbic IBTC Bank customers. Even though only three (Okongwu Cyprian; Vora Dolarray; Mehta Pradeep) were eventually able to attend the conference. The sponsorship ties with the financial institution’s strategic objective to facilitate trade between Asia and Africa. The conference was part of the efforts by the Chinese government to give support to trade liberalisation and economic globalisation and actively open the Chinese market to the world.

According to Stanbic IBTC, the clients were sponsored to help them exploit new markets for their products in Asia; to help the clients understand a better way to do business in China; provide access to peer-to-peer collaboration and learning for the clients, leveraging the ICBC connection; and to provide the platform for the clients to partake in the $10 trillion earmarked for imports into china over the next five years, among other objectives.

To ensure these objectives are met, SBG and ICBC organised a business matchmaking summit on the sidelines of the conference. The summit was to match SBG/Stanbic IBTC clients to ICBC clients in related fields, to enable them foster business relationships that may lead to export into China and a long-term relationship. The matchmaking summit further underscored the strategic importance of the relationship between SBG/Stanbic IBTC and ICBC; the need to leverage this relationship in accessing the opportunities in China and Africa; and the need to use SBG/Stanbic IBTC and ICBC as the International Trade gateway between Africa and China.

At the workshop, new relationships were forged and new markets attained. Participants agreed it was a valuable initiative that has had immediate positive impacts on their businesses. Dolarray, whose company, D2H Services Limited, is into the importation of agricultural equipment like grinding machines, was able to open talks with WuhanKenoway Auto Parts Limited and Sino Machineries for the production of customised equipment at very competitive pricing for the Nigerian market. “The invite from the Bank to attend the CIIE made me feel like part of the family. It’s obvious the bank is interested in my growth,” says Dolarray.

Mehta of Enkay Industry Nigeria Limited, an agro commodities processor & exporter, had an understanding with Jilin Voda Food to supply it at least 10,000 metric tonnes of sesame seed and ginger and also discussed buying grinders from Sino Machineries “to enable me increase my processing capacity in-country.” He says the sponsorship and the matchmaking summit “was of great value to me.”

Interestingly, the sponsorship and participation may have inadvertently opened the door to stronger trade relations among African businesses. At the conference, a Nigerian business, OC Cyprian Limited, in the building materials and accessory subsector, was able to forge a relationship with a Ghanaian businessman, Mike Adu, to export to Ghana. Okongwu Cyprian visited Ghana two weeks after the CIIE event to firm up trade with Adu as well as explore similar ecosystem for opportunities. “This initiative is great. At least I can say Stanbic IBTC is the first Nigerian bank to take its customers to the CIIE and I was a part of same. During the matchmaking session, I connected with Mike Adu from Ghana and can export materials to him. It’s a good initiative the bank has embarked on,” says Cyprian.

No doubt, Stanbic IBTC is taking seriously its role as a correspondent bank to the currency swap deal. Beyond that, however, it has expressed the willingness to continue to foster stronger trade ties between the Asian giant and Nigeria and is desirous to be seen as the bank that “connects clients to opportunities in China.”