China and Nigeria have renewed a 15 billion yuan ($2 billion) currency-swap arrangement designed to boost trade and investment between the two countries.
The facility will help strengthen financial cooperation and expand the use of the two currencies, the People’s Bank of China said in statement on Friday. “The agreement is valid for three years and can be renewed upon mutual consent,” it said.
China and Nigeria first signed the deal in April 2018 for a period of three years amid dollar shortages in the West African nation. China is Nigeria’s biggest trading partner ahead of the US. It imported $11.2 billion of goods and services from China and had exports worth $2.4 billion in 2023.
The currency deal aims to provide naira liquidity to Chinese businesses and yuan liquidity to Nigerian businesses, while reducing their dependence on the dollar as a basis for transactions.
Africa’s most populous nation has suffered significant dollar shortages until last year, when the central bank allowed the local currency to trade more freely against the dollar.
While liquidity in the foreign-exchange market has improved since Nigeria ended its currency peg, the naira has remained under pressure, losing 70% of its value since the regime was relaxed.
By reducing local demand for dollars in Nigeria, the facility could also help support the naira.
The Central Bank of Nigeria (CBN) sold a total of Chinese Yuan CNY1.26 billion in the First Half (H1) of 2022, under the Naira Yuan Bilateral Currency Swap Agreement.
The implementation of the three-year N720.00 billion/CNY15.00 billion Naira Yuan Bilateral Currency Swap Agreement between the Central Bank of Nigeria (CBN) and the People’s Bank of China (PBoC), which commenced in July 2018 was renewed in April 2021 for another three-year term.
The total sales from inception in 2018 to End-June 2022 stood at CNY7.043 billion, according to the CBN.
This is approximately equal to N445.32 billion.
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