BusinessDay 23 Aug 2018

26
BUSINESS DAY C002D5556 Thursday 23 August 2018
legal insight
BDLegalBusiness
Overview of the bilateral currency
swap agreement: Analysing
implications and opportunities
Etido David
The historic signing
of the Bilateral Currency
Swap Agreement
(BCSA), with
the People Republic
of China has generated a lot of
publicity and rightly so, given
the radical yet significant impact
of the swap arrangement on the
Nigerian economy. The signing
ceremony marked the culmination
of two years of negotiation
between the two countries,
which commenced during the
official state visit of the Nigerian
President Muhammadu Buhari
to the People’s Republic of China
in April 2016.
Nigeria’s vulnerability to external
shocks and issues with maintenance
of its external reserves as a
result of over dependence on oil,
Nigeria largest foreign exchange
(FX) earner is welled researched
and documented. Faced with a
need to create an alternative to
her over-dependence on the Petrodollar,
the BCSA allows for direct
currency exchange between
traders and investors in Nigeria
and China thereby utilizing the
liquidity of the swap deal.
The question then is, what is the
BCSA about? How does it work?
What are the potential implications
and opportunities, if any,
for individuals and corporate
citizens?
A Bilateral Currency Swap Agreement
involves a process where
two countries make available to
each other, its liquid currency to
facilitate the election of either
currency to denominate aspects
of their mutual trade on a direct
exchange backed by their respective
national currencies, rather
than a third-party intermediary
currency.
Overview of the Bilateral Currency
Swap Agreement
According to data made available
by the National Bureau of
Statistics, China is the 3rd largest
trading partner with Nigeria
after India and United States of
America. The figures show that
trade in goods between Nigeria
and China was at a record high
of circa N2.0tn in 2017, with total
import from China valued at
N1.8trn, while total Export from
Nigeria was valued at N220bn
giving a trade deficit of about
NI.6trn.
With the increasing volume
of trade between Nigeria and
China, the tripartite arrangement
where Nigerian businesses
involved in the importation of
finished products or raw materials
from China had to first convert
their Naira currency into the
United State Dollars (USD), and
then into the Chinese Renminbi
for payment to their Chinese
business counterparts was unsustainable,
as the practice piled
huge pressure on the Nigeria’s
foreign reserve.
The BCSA entered into by the Nigerian
Government and the People’s
Bank of China is a 3 (three)
year agreement for the exchange
of a maximum amount of 15 Billion
Chinese Renminbi for 720
Billion Nigerian Naira. Consequently,
Nigerian manufacturers,
small and medium-sized
enterprises and import dependent
Nigerian businesses can now
import products, raw materials,
and parts from the People Republic
of China and pay directly
with the Renminbi obtained
from an authorized dealer under
the currency exchange deal.
Conversely, Chinese manufacturers
and investors seeking to
buy raw materials from or invest
in Nigeria, may obtain Naira or
Naira denominated loans from
Chinese banks to pay for their
imports or investments.
Understanding the BCSA Architecture
The mechanics of the BCSA were
given life by the recently released
CBN Regulation On Transactions
With Authorised Dealers
In Renminbi (the “Regulation”).
The CBN via the Regulation has
announced that it would be
conducting bidding for the Renminbi
bi-weekly, and access to
the Renminbi offering would be
through authorized dealers who
are required to utilize the funds
within 72 hours from the value
date, failing which such funds
must be returned to the CBN for
repurchase at the Bank’s buying
rate. The Regulation further
provides for modes of payment
to be limited to Letters of Credit
transactions and Bills for Collection
transactions.
Interestingly, the 41 items noted
in the June 2015 circular of the
CBN are not valid to access the
Renminbi at the official FX market,
thus this points to the retention
of status quo on this issue.
Potential Implications of
Swap Arrangement
Based on our analysis of the
BCSA and the Regulation, we
outline below the potential effect
of the Renminbi accessibility.
a) Renminbi Liquidity for Nigerian
Businesses
One of the immediate impact
of the BCSA is the liquidity of
Chinese Renminbi for Nigerian
Businesses. Businesses which
had previously issued invoices
to their customers in Dollars
can transit to the issuance of
Renminbi or Naira denominated
invoice as the businesses will
now have access to the liquidity
of each currency to settle bills
and invoices directly.
Etido David is with the law firm,
Jackson, Etti & Edu.
To be continued next week
The President-elect of the Nba and his agenda
Continued from page 25
• TRANSACTIONAL EXPERI-
ENCE
Apart from earning his stripes as a
seasoned and exceptionally skilled
advocate, Paul is an experienced
transaction lawyer whose records
and accomplishments include
the world-acclaimed, first-ever
and all-round successful Nigerian
Digital Mobile Spectrum Auction
conducted in 2000. The transaction
earned the Federal Government
of Nigeria US$855,000,000.00 for
3 Digital Mobile Licences. Paul is
indeed generally acknowledged as
Nigeria’s leading communications
lawyer.
As an ICT law expert, Paul has
been involved in virtually all major
transactions and regulatory reforms
in the Nigerian communications
sector. In 2003, Paul Usoro drafted
the Nigerian Communications Act
2003, a robust and enduring piece
of legislation that regulates the
communications industry till date.
He has been the primary adviser
to the Nigerian Communications
Commission (NCC) in most of
its reform initiatives till date. He
served as Legal Consultant to NCC,
and was the only African and the
sole Legal practitioner in the sixmember
Auction Control Team
for the Global Systems of Mobile
Communications (GSM) Spectrum
Licence Auction that introduced
Econet Wireless Networks Limited
(now Airtel), MTN Communications
Limited and NITEL GSM to
the Nigerian market.
Additional core ICT regulatory
and transaction experiences
are highlighted hereunder: He
Drafted the Nigerian Communications
(Enforcement Processes
etc.) Regulations, 2005; Drafted
the Annual Operating Levy Regulations,
2014; Acted as sole legal
consultant to the NCC in respect of
the Mobile Number Portability and
drafted the Mobile Number Portability
Regulations, 2014 as part of
that assignment; Preparation, on
behalf of NCC, of a National Carrier
Licence and an International
Gateway Licences for NITEL, a hitherto
unlicensed monopoly; Acted
as lead legal consultants to NCC
for the Second National Operator
licensing processes, including the
auction and preparation of the 3
SNO licences; the process produced
Globacom Limited as Nigeria’s
Second National Carrier; Preparation
of the Interconnectivity Agreement
between NITEL and licensed
private network operators; Represented
NITEL in the negotiation of
the Construction and Management
Agreement for the laying of the SAT-
3/SAFE/WASC trans-continental
fibre-optic cable project which
spans the sub-Saharan African
Continent and extends to Far East
Asia through Southern Africa, with
European landing points. This was
the first trans-continental cable project
in sub-Saharan Africa.
On account of Paul’s acknowledged
eminence as Nigeria’s leading
Communications Lawyer, Akwa
Ibom State Government appointed
and relied on him to manage its
portfolio investment in Airtel in
2001. Paul negotiated this investment,
valued as at the date of entry
at the sum of US$75,000,000.00. Up
to May 2006, Paul sat on the Board
of Airtel as a Director representing
Akwa Ibom State. Akwa Ibom State
Government cashed out most of
its investments in this enterprise in
2006, in the transaction by which
Celtel BV successfully invested over
US$1,000,000,000, by way of share
purchase from existing shareholders
and injected fresh capital into
Airtel (“Celtel Transaction”), which
transaction was chiefly negotiated
by Paul. The State indeed made
multiple returns on its investment
amount.
A founding Secretary General,
Telecommunications Law Association,
Usoro was named ‘Best
Pan African Telecoms Lawyer of
All Times’ by the IT and Telecom
Digest, Nigeria’s leading and one of
Africa’s foremost ICT magazines.
• BOARDROOM EXPERIENCE
Paul is a consummate boardroom
person whose deep analytical mind
and illustrious leadership skills are
well appreciated in all the Boards he
sits. He has, at various times, served
on the Boards of several companies
such as Premium Pensions Ltd,
CR Services (Credit Bureau) Plc
(representing Zenith Bank Plc),
Nigerian Bulk Electricity Trading
Plc and currently sits on the Boards
of PZ Cussons Plc., Airtel Networks
Limited, Marina Securities Ltd and
Access Bank Plc.
Usoro is a pioneer director of Airtel
Nigeria Limited, Nigeria’s leading
mobile telephone company, having
been appointed to the Company’s
Board in 2001, then known as
Econet Wireless Networks Limited;
the company has over the years
undergone major ownership and
structural changes prior to being
acquired by Bharti Airtel of India
in 2010. Paul is the only surviving
pioneer director of the company
and has headed the Board’s Audit
Committee since the entry of Bharti
Airtel till date.
A director of Access Bank Plc,
one of Nigeria’s leading banks,
from 2014, Paul chairs the Board’s
Remuneration Committee and
Governance & Nomination Committee.
He also serves as a member
of the Board’s Audit Committee,
Risk Management Committee
and Credit & Finance Committee.
Paul was appointed as a director of
PZ Cussons in 2011; he chairs the
People & Governance Committee
of the Board.
• PUBLIC SERVICE
The erstwhile President of Nigeria,
Dr. Goodluck Jonathan, GCFR, in
2011, appointed Paul a pioneer
director on the board of Nigerian
Bulk Electricity Trading Plc (NBET)
– Nigeria’s sole power trading organization,
fully-owned by the
Federal Government of Nigeria.
The NBET Board was, at that time
chaired by the then Nigeria’s Minister
of Finance and the Coordinating
Minister of the Economy, Dr. Ngozi
Okonjo-Iweala, with the Minister of
Power as a member. Paul was also
the pioneer Chairman of the NBET
Board’s Audit Committee.
In 2012, Paul was appointed by
the Minister of Communications
Technology into a select Ministerial
Committee for the review of Nigeria’s
ICT Policy and he played a key role in
that Committee’s work, which final
work product was approved by the
Federal Executive Council.
Usoro is also on the Faculty of
the Nigerian Institute of Advanced
Legal Studies as an astute trainer
on telecommunications law and
practice.
NBA Activities
Paul was the pioneer Chairman of
the Communications Committee
of the NBA Section of Business Law
(“SBL”). Supported by Paul, PUC is
actively involved in the sponsorship
of SBL activities. The Firm
produced the Chairman of the SBL
between 2010 and 2011, with the
total support of Paul Usoro, SAN.
• PAPERS AND SCHOLARLY
WORKS
AA Telecommunications Law and
Regulations”. Paper presented at
the Legal Advisers/Law Officers
Course organized by the Nigerian
Institute of Advanced Legal
Studies.
• Drafting Commercial Agreements
and Banking Documents:
Telecommunications Contracts”.
Paper presented annually from
2003 to Course participants at
Nigerian Institute of Advanced
Legal Studies, Lagos Campus.
• Frontloading under Akwa
Ibom State High Court (Civil
Procedure) Rules 2009”. Lead
Presentation at Joint Workshop
by the 3 Nigerian Bar Association
Branches (Uyo, Ikot Ekpene and
Eket) in Akwa Ibom State.
• Legal Practice and the Prospects
of Litigation in Nigeria”. Lead
Paper presented at a Session of
the Nigerian Bar Association’s
Section of Legal Practice Maiden
Conference in Abuja.
• Licensing Procedures under
Communications Act 2003”. Paper
presented at the Nigerian Bar
Association, Port Harcourt Branch
Bar Seminar/Law Week in Port
Harcourt.
• Emerging Nigerian Communications
Industry and the Role
of Lawyers”. Paper presented
at the 2004 Annual Conference
of the Nigerian Bar Association
held in Abuja.
• Creating an Enabling Legal
Environment for Information
Technology. Presented at NITDA
organized “E-Nigeria” Workshop
in Abuja.
• Nigerian Issues on Interconnectivity
Arrangements.
Presented at the International
Conference on Electronic Commerce
and Telecommunications
in Lagos.
• Commentary on Paper presented
by Chief E A O Idowu
titled “Bills of Lading: Practical
Implications – Today and Tomorrow”.
Commentary made at 6th
Annual Maritime Seminar for
Judges in Abuja.
• Legal Significance of and Issues
on Electronic Bill of Lading.
Presented at the Annual Maritime
Seminar for Judges in Abuja.
• Legal Framework for Introduction
of E-Commerce. Presented
at US Embassy organized
CTO Week in Lagos.
• Digital Mobile Licence Auction:
The Success Story and the
Challenges therefrom. Presented
at the Lagos Business School in
Lagos.
• Drafting Commercial Agreements
Banking Documents:
Telecommunications Contracts.
Presented at Nigerian Institute
of Advanced Legal Studies,
Lagos.