Qataris aid Kenya’s bid for centre to clear Chinese currency

Gas-rich Qatar has formally signed up to help Kenya set up the Nairobi International Financial Centre (NIFC) that is hoped to aid Nairobi’s push to host a Chinese renminbi currency clearing centre.

Treasury Secretary Henry Rotich, and Qatari finance minister Ali Al-Emadi signed a memorandum of understanding for the establishment of the NIFC in a meeting held on the sidelines of the launch of a renminbi-clearing centre for Middle East in Doha, Qatar.

Kenya has been looking to establish the NIFC since 2008. It is supposed to have a well-functioning financial system to attract international capital issuers and investors and act as the gateway for finances into the eastern and southern Africa region.

“The signing of the MOU with Qatar is to help support the establishment of the NFIC and may also lead to the eventual establishment of a renminbi clearing centre in Nairobi… a team of experts from Qatar Financial Authority Centre have been working with officials of the National Treasury of Kenya since 2012 towards the realisation of NIFC,” said a statement by Kenya’s embassy in Doha.

Qatar had pledged to help Kenya develop Nairobi as the region’s financial hub in April 2014 during a visit by President Uhuru Kenyatta to the Gulf state, and has been offering advice to Kenyan officials on the formulation aspects of the centre.

The project was first mooted during the Kibaki administration but has had several false-starts and controversy.

In May last year, President Kenyatta gazetted the Nairobi Financial Centre Authority (NFCA) which is tasked with licensing companies to operate under the centre and formulating the legal, regulatory and institutional aspects of the centre.

READ: Qatar to support Kenya transform into financial hub

The Treasury plans to fast-track regulatory changes opening up listed companies to full foreign ownership this year from the current limit of 75 per cent as it races to meet one of the key requirements for market accessibility for international financial centres.

On a visit to China in August 2013, the President announced intention to host the renminbi clearance house in Nairobi with an eye on the booming trade between China and African states.

Setting up structures for direct exchange of the shilling and the Chinese currency through the clearing house could boost trade between the two countries by easing commercial transactions.

Kenyan exporters to China normally have payments processed through a lengthy process that involves physically sending Chinese payment cheques back to the country for clearance and payment.

With a clearing house, the cheques could be processed locally through an agreement between the two central banks thus expediting payments and easing the cost trade.

China’s currency is yet to gain the status of the US dollar as an international unit despite the country’s huge trade portfolio, in part due to the tight exchange control by Beijing. China has however been looking to internationalise its currency.

The Doha renminbi clearing centre is the first one in the Middle East and North Africa (MENA) region, joining 14 other centres mainly situated in Europe, East Asia, Australia and Canada.