December 28, (THEWILL) – Nigeria and China have renewed their bilateral currency swap agreement, extending the $2.09 billion (15 billion yuan or N3.28 trillion) arrangement for another three years.
In a statement published on Friday, the People’s Bank of China announced that the agreement, initially signed in 2018, was renewed with the Central Bank of Nigeria. The renewal comes with provisions for further extensions based on mutual consent.
“The agreement is valid for three years and can be renewed upon mutual consent,” the statement read.
The PBOC noted that the renewal would bolster financial cooperation between Nigeria and China, encourage the use of their respective currencies, and promote bilateral trade and investment.
First introduced in June 2018, the currency swap was designed to alleviate liquidity challenges for businesses in both nations by enabling direct currency exchanges between the Chinese yuan and the Nigerian naira.
This eliminates the need to rely on the US dollar as an intermediary, thereby reducing transaction costs.
The agreement permits the exchange of up to 15 billion yuan for 720 billion naira, valued at $2.5 billion when the swap was initially signed at an exchange rate of N305 to $1.
Under this framework, the central banks of both countries conduct bi-weekly auctions to inject liquidity into their financial systems.
The arrangement facilitates seamless transactions for Chinese businesses operating in Nigeria and Nigerian firms trading in China. It also supports bilateral investments, enhances market efficiency, and reduces dependency on foreign exchange intermediaries.
By providing liquidity in local currencies, the swap deal aims to streamline trade processes, minimize exchange rate risks, and foster stronger economic ties. It is expected to ease the operations of Nigerian businesses exporting to China while supporting Chinese companies importing goods to Nigeria.
As the two countries reaffirm their commitment to this strategic partnership, the currency swap remains a pivotal tool in enhancing economic cooperation and strengthening trade relations between Africa’s largest economy and the world’s second-largest economy.
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