The federal government and China have renewed their 15 billion Yuan ($2 billion) currency swap agreement, aimed at strengthening bilateral trade and investment relations.
According to Bloomberg, the People’s Bank of China (PBOC), in a statement on Thursday, confirmed that the agreement has been extended for another three years, with provisions for further renewal based on mutual consent.
“The agreement is valid for three years and can be renewed upon mutual consent,” the PBOC stated.
The deal enables the direct exchange of the Chinese Yuan and Nigerian Naira, eliminating reliance on the US dollar to reduce transaction costs and promote trade efficiency between the two countries.
Originally signed in June 2018, the currency swap facility was designed to address liquidity challenges and facilitate trade in local currencies. At the time, the agreement allowed for the exchange of 15 billion Yuan for 720 billion Naira, equivalent to $2.5 billion at an exchange rate of NGN305 to $1.
The arrangement permits the central banks of both nations to inject liquidity into their financial systems through bi-weekly auctions, supporting the seamless exchange of Yuan and Naira to facilitate trade and investment activities.
According to the agreement, the swap is designed to streamline trade transactions by eliminating the need for US dollars as an intermediary currency.
It provides liquidity in naira for Chinese businesses operating in Nigeria and in yuan for Nigerian firms trading in China. This mechanism aims to facilitate seamless transactions, support bilateral investments, and enhance market efficiency.
The arrangement allows the central banks of both countries to inject liquidity into their respective financial systems via bi-weekly auctions.
By doing so, they promote the purchase, sale, and repurchase of yuan and naira to support trade and investment activities. The agreement shows the deepening economic ties between China and Nigeria, prioritising direct currency exchanges to reduce dependency on the dollar and encourage cross-border trade.
