UK Export Finance adds the naira to the list of currencies permitted for its transactions

BRITAIN'S export credit agency UK Export Finance (Ukef) has pre-approved the addition of the Nigerian naira to its list of currencies permitted for funding transactions between the two nations in a bid to promote trade.

In a big boost for the Nigerian economy, Ukef will now permit the naira to be used to provide financing for transactions with Nigerian businesses denominated in the local currency. As a result the naira will now become one of three West African currencies that Ukef has pre-approved for its programme of funding transactions that promote trade with Britain.

Britain voted to leave the European Union (EU) in 2016, which has forced London to rethink its trade ties with the rest of the world. Britain said it will start preliminary talks with India about an eventual bilateral trade deal and last December, London and the EU struck an agreement that opened the way for talks on future trade ties.

Paul Arkwright, Britain's high commissioner to Nigeria, said this latest deal is a clear indication of how much value the UK places on its relationship with Nigeria. He added that the move will provide a firm foundation for a significant increase in trade and investment between both countries.

According to Ukef, under the terms of this trading arrangement with Nigeria, the UK would provide up to 85% of funding for projects containing a minimum of 20% British content. Naira financing will follow the same structure as someone buying in sterling, except that Nigerian firms taking out a loan in local currency can benefit from a UK government-backed guarantee.

This will enable businesses to manage foreign exchange risks and many times, to negotiate better terms with local banks.  Total UK exports to Nigeria amounted to £3.3bn in the four quarters of 2022, while UK imports from Nigeria added up to £2.2bn in the same period, putting the trade volume between the two countries at £5.5bn.