Nigeria and China have agreed on a currency-swap deal worth US$ 2.4 billion. Both sides hope the deal boosts commercial ties and reduce the need to use the dollar in bilateral trade.
The governor of the People’s Bank of China Yi Gang and his Nigerian counterpart signed the three-year swap of 15 billion Yuan (about 720 billion naira) in Beijing on April 27, a statement from the Chinese central bank read in part.
The deal, more than two years in the making, 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 separate statement.
It will allow Nigerian companies to import spare parts and raw materials from China by sourcing renminbi from local banks and help them avoid “the difficulties of seeking other scarce foreign currencies,” it said.
Nigeria suffered dollar shortages after the 2014 crash in oil prices, which battered the OPEC member’s economy. Those foreign-exchange scarcities have eased in the last year thanks to an almost 45 per cent rise in Brent crude prices to US$ 72.91 a barrel and an increase in portfolio investments.
Nigeria attracted fund inflows by opening a currency-trading window for foreign investors known as Nafex, in which the naira was allowed to weaken. The currency-swap with China was calculated at the Nigerian central bank’s official rate for the naira of around 305 per dollar, rather than the Nafex rate of 360.5.
China has signed several currency-swaps with emerging markets. In 2015, it agreed a three-year swap worth $4.8 billion with South Africa.
