The British government through its export credit agency [UKEF], United Kingdom export finance, has approved the acceptance of naira notes from Nigerians for business transactions made in Britain. This will enable the United Kingdom (UK)’s export finance agency to finance transactions with Nigerian businesses denominated in the local currency. This has marked Nigeria’s currency as one of the 3 West African currencies pre-approved for funding transactions promoting trade in Britain. This approval enables businesses to manage foreign exchange risk and bargain better terms with local banks, therefore, providing a firm platform for a significant increase in trade and investment between Britain and Nigeria.

Under this arrangement, the United Kingdom will provide up to 85 percent of funding for projects containing at least 20 percent British content. The naira financing will follow the same structure as someone buying in sterling, except that Nigerian firms taking out a loan in the local currency can benefit from a UK government-backed guarantee.

Analysts welcomed the impact of the financing option on the local currency. Still, they said it might increase Nigeria’s liability as trades mature for settlement and questioned the rate at which funds would be disbursed since local interest rates are in high double-digits.