China’s yuan has attracted more and more attention in African countries thanks to its advantages in facilitating China-Africa trade and investment, optimizing the structure of foreign exchange reserves and stabilizing the financial system.
Officials, experts and scholars from various African countries have seen it as an inevitable trend for the yuan to be adopted as Africa’s reserve and settlement currency in the future, which will not only benefit local economic development, but also boost the internationalization of the yuan.
Officials of central banks and finance ministries from 14 African countries have suggested they are considering the Chinese yuan as a reserve currency and expanding its use across the whole continent, said Caleb Fundanga, executive director of the Macro Economic and Financial Management Institute of Eastern and Southern Africa.
Given China’s growing share of the global economy and its status as an important trading partner for countries in the region, it would be beneficial for African countries to use the yuan as a reserve currency, Fundanga was quoted by the Xinhua News Agency as saying.
It is reported that countries such as Rwanda have included the yuan into their foreign exchange reserves.
South Africa, Nigeria and others have signed currency swap agreements with China, while Kenya, Zimbabwe and Botswana have shown a strong interest in using the yuan as a reserve or settlement currency.
Nigeria’s central bank asked lenders on Friday to submit bids for the Chinese yuan, traders said, in its second auction of the currency after it agreed a swap with the People’s Bank of China, the country’s central bank, in May.
In May, the central bank signed a $2.5 billion three-year currency swap deal with Beijing to facilitate trade between the two countries and cut reliance on the dollar.
It sold 69.86 million yuan ($10.16 million) in its first auction of the Chinese currency two weeks ago at a range of 49-51 Nigerian naira.
The auction is part of efforts to encourage the use of an alternative trading currency to the US dollar, especially as Nigeria imports heavily from China.
Namibian economic analyst Harold Snyders believes the yuan is much more stable and stronger than regional currencies, such as the South African rand, and could turn around Namibia’s sluggish economy.
The international settlement of African countries is mainly in the US dollar, but there is not much direct trade with the US, and their total trade with China is larger.
The inclusion of the yuan in their “currency baskets” will help reduce transaction costs and improve financial security, said Zhu Yongkai, business manager of the Bank of China’s Nairobi office.