Nigeria and China have renewed their currency swap agreement worth 15 billion Yuan ($2 billion) to bolster bilateral trade and investment while reducing reliance on the US dollar. The People’s Bank of China (PBOC) confirmed yesterday that the arrangement, initially established in 2018, will continue for another three years, with the possibility of further extensions upon mutual agreement.
The agreement allows for direct exchanges between the Chinese Yuan and Nigerian Naira, enabling smoother transactions for businesses in both countries by eliminating the need for a dollar intermediary. Originally designed to address liquidity challenges, the swap has streamlined trade between the two nations and supported investments in their respective currencies.
Under the deal, the central banks of both countries conduct bi-weekly auctions to inject liquidity, facilitating the seamless purchase, sale, and repurchase of naira and yuan. This mechanism aims to enhance market efficiency and promote bilateral trade while reducing transaction costs. The swap facility, which initially covered 15 billion Yuan for 720 billion naira, has been instrumental in supporting Chinese firms in Nigeria and Nigerian businesses trading in China.
