In a significant step to strengthen economic ties, China and Nigeria have renewed their currency swap agreement valued at 15 billion Yuan (approximately $2 billion).
The agreement, confirmed by the People’s Bank of China (PBOC), will remain in effect for another three years, with the possibility of renewal upon mutual consent.
The currency swap arrangement, which was originally signed in June 2018, allows for the direct exchange of the Chinese Yuan and Nigerian Naira, bypassing the need for US dollars.
This move is expected to reduce transaction costs and simplify trade between the two nations, fostering deeper economic collaboration.
The renewed agreement continues to help address liquidity challenges faced by businesses in both countries. It also enhances the ability of Nigerian companies trading with China and Chinese businesses operating in Nigeria to access local currencies—Naira and Yuan—more easily.
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This is a significant advantage for companies involved in cross-border transactions, as it minimizes the need for US dollars as an intermediary currency.
As part of the agreement, both central banks will conduct bi-weekly auctions to facilitate the sale, purchase, and repurchase of the Naira and Yuan, injecting liquidity into their financial systems.
This mechanism not only supports trade but also encourages greater investments and promotes financial stability in both countries.
Economic analysts note that the renewal of the currency swap deal highlights the growing partnership between China and Nigeria.
By reducing their reliance on the US dollar, both nations aim to enhance trade flows, improve market efficiency, and drive economic growth.
This move also aligns with their broader goal of promoting sustainable development and fostering stronger bilateral relations.