September 3, 2025
Traders in forex market have attributed the recent stability in the exchange rate to the success of Nigeria’s currency swap agreement with Chinese traders who now collect naira for yuan, instead of dollars.
The traders also identified Peer-to-Peer, P2P, foreign currency trade as one of the factors that is contributing to the stability of the naira.
Peer-to-peer foreign currency exchanges provide users with cost savings and convenience as individuals with an online platform can exchange currencies with one another, cutting off intermediaries like banks, foreign exchange services, and other institutions.
The traders stated that these factors are helping to put less pressure on the naira.
In April 2018, Nigeria and China first signed the currency swap agreement for a period of three years amid persistent dollar shortages across the country due to excessive demand for the dollars.
READ MORE; Naira Appreciates To N1,535 Against U.S Dollar.
Ahead of the US, China is Nigeria’s biggest trading partner. In 2024, Nigeria imported N14.14 trillion worth of goods and services from China and exported goods worth over N3 trillion.
The deal allows both the Central Bank of Nigeria, CBN, and the People’s Bank of China, PBoC, which are executing the agreement on behalf of their respective countries, to swap a maximum amount of $2.5 billion.
As part of the regulation then released, the CBN and PBoC were expected to make available liquidity in their respective currencies for the facilitation and promotion of trade and investments between the two countries through the purchase, sale, and subsequent repurchase and resale of the Chinese Yuan against the Naira and vice versa.
With a view to reducing their dependence on the dollar as a basis for transactions, the currency swaps deal was designed to provide naira liquidity to Chinese businesses and yuan liquidity to Nigerian businesses.
READ MORE; Naira Starts The Week At N1560/$, Dollar Stable After Friday’s Crash
In December 2024, the Federal Government was reported to have renewed the currency swap deal worth about $2 billion with China in a bid to strengthen bilateral trade and investment between both countries.
This development was to improve bilateral trade between the two countries and engender foreign investment flows and economic cooperation beneficial to both parties.
However, since imports from China are reported to account for only 20% of Nigeria’s annual total imports, there are still concerns over the ability of the currency swap agreement to sufficiently address the challenge of dollar demand by importers.
