The People’s Bank of China, on Friday has announced that China and Nigeria have renewed a 15 billion yuan ($2bn) currency swap agreement to enhance bilateral trade and investment.
Reports had it that the renewed agreement valid three years, with an option of extension, upon mutual consent is designed to financial cooperation and promote the broader use of yuan and naira in transactions between the two nations.
The deal, initially signed in May 2018, marked a milestone in economic relations between Africa’s largest economy and the world’s second-largest economy.
The initial framework was valued at renminbi (RMB) 16 billion (approximately $2.5bn) and aimed at providing businesses in both countries direct access to their respective currencies, bypassing reliance on third-party currencies like the US dollar.
“This agreement will provide naira liquidity to Chinese businesses and RMB liquidity to Nigerian businesses, improving the speed, convenience, and volume of transactions between the two countries,” the Central Bank of Nigeria (CBN) stated at the time of the initial signing.
The renewal of the currency-swap deal aligns with the recent commitments made by Nigerian President Bola Tinubu and Chinese President Xi Jinping during their September meeting.
The leaders emphasized the importance of fostering flexible regional monetary and financial cooperation, including local currency swaps, to facilitate trade and investment between their countries.
Trade between Nigeria and China accounts for nearly 30 percent of Nigeria’s total trade volume, highlighting the critical role of the partnership in the Nigerian economy. By reducing reliance on the US dollar, the agreement is expected to ease cross-border transactions, deepen economic ties, and encourage investment flows between the two nations.
Both nations have pledged to collaborate on financial intelligence, with a focus on combating money laundering and countering the financing of terrorism.
The People’s Bank of China noted that the agreement is expected to bolster the use of local currencies in international trade while fostering a more robust financial relationship between the two nations.
The currency-swap framework was first signed by Godwin Emefiele, the suspended Governor of the CBN, and Yi Gang, the former Governor of the People’s Bank of China.
It was designed to enable industrialists and businesses to conduct transactions directly in yuan and naira, eliminating the complexities and costs associated with currency conversion.
