Britain’s export finance agency will add the naira to its list of “pre-approved currencies”, allowing it to provide financing for transactions with Nigerian businesses denominated in the local currency.
The naira will become one of three West African currencies that UK Export Finance has pre-approved for its programme of funding transactions that promote trade with Britain, it said according to a Reuters report.
Britain voted to leave the European Union in 2016, which has forced London to rethink its trade ties with the rest of the world. It has said it will start preliminary talks with India about an eventual bilateral trade deal.
The United Kingdom and the EU struck an agreement in December that opened the way for talks on future trade ties.
“This is a clear indication of how much value the UK places on its relationship with Nigeria,” Paul Arkwright, the British High Commissioner to Nigeria, said in the UK’s credit agency statement.
“It will provide a firm foundation for a significant increase in trade and investment between both countries.”
The statement said the UK will provide up to 85 percent of funding for projects containing a minimum of 20 percent British content.
The naira financing will follow the same structure as a someone buying in sterling, except that Nigerian firms taking out a loan in local currency can benefit from a UK government-backed guarantee.
“This can enable businesses to manage foreign exchange risks and, many times, to negotiate better terms with local banks.”