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Nigeria, China opt currency swap to cut dollar use

Nigeria, Africa’s largest economy, and China have agreed to swap their currencies in order to reduce their dependency on third-country currencies and thereby, give a boost to their bilateral trade. The agreement for a three-year swap of 15 billion yuan or 720 billion naira was signed by the Central banks of both countries in Beijing last week.

The currency swap was calculated at the Nigerian central bank’s official rate of around 305 naira per dollar.

The transaction will “provide naira liquidity to Chinese businesses and provide renminbi liquidity to Nigerian businesses respectively, thereby improving the speed, convenience and volume of transactions between the two countries,” the Central Bank of Nigeria said in a statement.

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It will allow Nigerian companies to import spare parts and raw materials from China by sourcing the Chinese currency from local banks and help them avoid “the difficulties of seeking other scarce foreign currencies,” it said.

The deal will also help Chinese manufacturers sourcing raw materials from Nigeria to obtain the Nigerian currency from banks in China to pay for their imports from the African country.

Nigeria is now the third African country to have signed such an agreement with the People’s Bank of China, the Chinese central bank.

The agreement is currently for a three-year period, but it can be renewed if both parties approve.

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