Nigeria and China have renewed their currency swap arrangement worth 15 billion Yuan ($2 billion) as a strategic step to strengthen economic ties and boost bilateral commerce.
The People’s Bank of China (PBOC) confirmed the extension in a statement, declaring that the arrangement will be extended for another three years, with the possibility to renew upon mutual agreement.
“The agreement is valid for three years and can be renewed upon mutual consent,” Bloomberg quoted the PBOC.
By avoiding the need for US dollars and facilitating the direct exchange of the Chinese Yuan and Nigerian Naira, the renewed agreement lowers the costs involved in trading between the two countries.
The currency exchange facility was first agreed in June 2018 with the goal of easing liquidity issues for companies in both nations and facilitating commerce in their respective national currencies. At an exchange rate of NGN305 to $1, the arrangement initially permitted the exchange of up to 15 billion Yuan (CNY) for 720 billion Naira (NGN), or $2.5 billion.
By eliminating the need for US dollars as an intermediary, the agreement streamlines cross-border transactions and improves market efficiency. Nigerian businesses trading in China, as well as Chinese corporations operating in Nigeria, will benefit from easier access to liquidity in the naira and yuan, allowing for more fluid operations and growth.
The arrangement allows both nations’ central banks to infuse liquidity into their financial systems via bi-weekly auctions, boosting the sale, purchase, and repurchase of the naira and yuan. This system aims to promote trade, bilateral investment, and financial stability.
The extension of this swap agreement, according to economic analysts, is a testament to the growing partnership between China and Nigeria. By giving direct currency exchanges priority, both countries hope to lessen their dependency on the dollar and increase trade, which will support economic growth and sustainable development.
