Credit: Kenneth Appiah Bani.
Nigeria and China have recently renewed a $2 billion currency swap agreement, aimed at boosting trade and investment between the two countries. The agreement, which was confirmed by the People’s Bank of China, is set to enhance financial cooperation and promote the use of the Chinese yuan and Nigerian naira in trade transactions.
This renewal comes as a positive development for both nations, as it will facilitate direct currency exchange between the yuan and naira, reducing the reliance on the US dollar and lowering transaction costs. The agreement, initially signed in 2018, was designed to address liquidity challenges for businesses in Nigeria and China, as well as to promote trade in their respective currencies.
The currency swap agreement allows for the exchange of up to 15 billion Chinese yuan for 720 billion Nigerian naira, equivalent to $2.5 billion. This system eliminates the need for the US dollar as an intermediary currency, making trade transactions more efficient and cost-effective for businesses in both countries.
Furthermore, the agreement is expected to support bilateral investments, enhance market efficiency, and improve foreign exchange reserves management for Nigeria and China. By injecting liquidity into their financial systems through bi-weekly auctions, the central banks of both countries aim to promote financial stability and foster broader economic cooperation.
In conclusion, the renewal of the currency swap agreement between Nigeria and China signifies a commitment to strengthening economic ties and promoting mutual benefits for both nations. This agreement is a step towards enhancing trade and investment opportunities, as well as fostering financial cooperation between Nigeria and China.
