by Ikenna Emewu
The need for improved financial integration between African countries and China to power the global economy is one of the key objectives of the Forum on China-Africa Cooperation (FOCAC).
Back in 2018, the Nigerian central bank said that about 35 percent of requests for foreign exchange it processes for international businesses were made by Nigerians doing business with China. Based on the robust need, the bank and the People's Bank of China (PBOC) signed a currency swap agreement worth 15 billion Chinese yuan (2.5 billion U.S. dollars) in April that year.
The deal was made to enable Nigerian businesses trading with China to exchange their naira directly with the yuan, bypassing the circuitous process of an intermediary or third-party currency.
Today, a minimum of 20 percent of Africa's exports go to China and about 16 percent of Africa's imports come from China, according to the International Monetary Fund (IMF). The two grossed a record 282 billion dollars in total trade volume in 2023.
Meanwhile, Chinese foreign direct investment (FDI) in Africa has increased significantly over the last two decades to 49.1 billion dollars in 2019, up by 100-fold from the year 2000 when the FOCAC was founded.
Under frameworks of FOCAC and the Belt and Road Initiative (BRI), China has aligned its engagement with Africa with the African Union's Agenda 2063, which aims to promote the economic transformation of the continent within a 50-year strategic plan.
Notably, African banks have been increasing their presence in China.
In October, Access Bank UK, a subsidiary of Nigeria's Access Bank, opened a branch in Hong Kong to strengthen economic ties between Asia and Africa. It came a few months after South Africa's Absa Bank Group opened its new non-banking subsidiary in Beijing.
At the China-Africa Economic and Trade Expo held in Abuja in November, I met a Chinese representative of First Bank of Nigeria. The business card he gave me indicated that the oldest bank of Nigeria operates an office in Beijing. Before these Nigerian and South African banks' presence in China, the Moroccan Bank of Africa and the National Bank of Egypt already have branches in Shanghai.
The good news is that this is not a lopsided development, as Chinese banks are also sprouting up in African countries, such as the Bank of China, which sets up shop in countries including Angola, Zambia and South Africa. In addition, the Industrial and Commercial Bank of China, holding some 20 percent of shares of Standard Bank of South Africa, has established partnership with the Johannesburg-based bank group.
With China's leading presence in infrastructure contracting, business transactions, growing trade volumes and manufacturing on the continent, these banks from both ends will facilitate access to credit facilities as well as seamless financial transfers and exchanges.
They will also ensure that African countries do not rely on a monopolistic use of the U.S. dollar for international business deals. That will help firm up the value of the currencies of African countries weighed down by the U.S. dollar. Their operations will open up the international transaction space and reduce the bullying of the U.S. sanctions.
Moreover, as the RMB has become an international transaction currency since the IMF adopted it into the special drawing rights basket in 2016, its use in international circles will increase and shore up its general value.
This point in the FOCAC financial integration journey was strengthened by China's announcement at the September summit of new financial support to Africa in the next three years. There are good signals of an emerging stronger economic bond between the two and ongoing evolution of FOCAC, which is approaching its 25th anniversary.
Editor's note: Ikenna Emewu is editor-in-chief of Africa China Economy Magazine in Nigeria.
The views expressed in this article are those of the author and do not necessarily reflect the positions of Xinhua News Agency.