Nigeria and China have renewed their currency swap agreement, valued at 15 billion Yuan ($2 billion), in a bid to strengthen trade and investment between the two countries. The People’s Bank of China (PBOC) confirmed that the deal would remain in place for another three years, with the option for renewal upon mutual agreement.
Initially signed in June 2018, the currency swap agreement was designed to facilitate smoother trade by allowing for direct exchanges between the Chinese Yuan and Nigerian Naira. This bypasses the US dollar, reducing transaction costs and mitigating risks associated with currency fluctuations. The move is aimed at addressing liquidity challenges for businesses in both countries, enabling them to conduct transactions in their own currencies rather than relying on the US dollar.
Under the renewed agreement, up to 15 billion Yuan (CNY) can be exchanged for 720 billion Nigerian Naira (NGN), which is roughly equivalent to $2.5 billion based on the exchange rate of NGN305 to $1 at the time of the original deal. This mechanism allows for more efficient and cost-effective trade between the two nations, fostering greater bilateral economic cooperation.
The swap also provides liquidity to Chinese businesses operating in Nigeria in Naira, and to Nigerian firms engaged in trade with China in Yuan. This arrangement not only promotes investment flows but also enhances market stability and reduces the cost of cross-border transactions.
As part of the agreement, the central banks of both countries will continue holding bi-weekly auctions to inject liquidity into their financial systems, ensuring the smooth exchange and circulation of Yuan and Naira. The move highlights the increasing economic ties between China and Nigeria, as both nations seek to reduce their dependency on the US dollar and bolster trade through direct currency exchanges.
The renewal of this agreement reflects the growing strategic partnership between China and Nigeria, underscoring both nations’ commitment to improving financial cooperation and advancing mutual economic interests.