December 28, 2024
The People’s Bank of China, PBOC, has confirmed the renewal of currency swap agreement between their country, China and Nigeria worth 15 billion Yuan ($2 billion) and that the arrangement will remain in place for another three years, with provisions for renewal by mutual agreement.
The renewal is part of moves to strengthen cooperation and promote bilateral trade and investment between both countries.
According to Bloomberg, the bank said that “The agreement is valid for three years and can be renewed upon mutual consent.”
The agreement allows a direct exchange of the Chinese Yuan and Nigerian naira, bypassing reliance on the US dollar and reducing transaction costs in trade amongst the two countries.
The currency swap agreement was originally signed in June 2018 and was introduced to address liquidity challenges for businesses in both countries and to facilitate trade in both nation’s currencies.
The agreement then, enabled the exchange of up to 15 billion Chinese Yuan, for 720 billion Nigerian naira, equivalent to $2.5 billion at an exchange rate of NGN305 to $1.
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The swap was designed to streamline trade transactions by eliminating the need for US dollars as an intermediary currency.
Additional, it provides liquidity in naira for Chinese businesses operating in Nigeria and in yuan for Nigerian firms trading in China and also allows the central banks of both countries to inject liquidity into their respective financial systems via bi-weekly auctions.
The agreement shows the deepening economic ties between China and Nigeria, prioritizing direct currency exchanges to reduce dependency on the dollar.
