Boost for Nigeria, China Trade

The Central Bank of Nigeria has finally signed a bilateral currency swap agreement with the People’s Bank of China, after two years of painstaking negotiations,

The Acting Director, Corporate Communications, CBN, Mr. Isaac Okorafor confirmed the development on Thursday in Abuja. He said the CBN Governor, Mr. Godwin Emefiele, led officials of the apex bank, while the PBC Governor, Dr. Yi Gang, led the Chinese team to the signing ceremony, which was held in Beijing, China.

The transaction is aimed at providing adequate local currency liquidity for Nigerian and Chinese industrialists and other businesses in order to reduce their difficulties in the search for a third currency.

This, according to Okorafor, will improve the speed, convenience and volume of transactions between both countries. It will also assist both countries in their foreign exchange reserves management, enhance financial stability and promote broader economic cooperation between them.

The agreement will allow both sides to swap a total of 15 billion Chinese yuan ($2.35 billion) for N720 billion, or vice versa, in the next three years, PBoC said on its website.

The move is aimed at facilitating bilateral trade and investment and promoting the financial stability of both countries, the PBoC said. The deal can be extended by mutual consent.

A currency swap deal allows two institutions to exchange payments in one currency for equivalent amounts in order to facilitate bilateral trade settlements and provide liquidity support to financial markets.

Okorafor stated, “The deal, which is purely an exchange of currencies, will also make it easier for Chinese manufacturers seeking to buy raw materials from Nigeria to obtain enough naira from banks in China to pay for their imports from Nigeria.

“Indeed, the deal will protect Nigerian business people from the harsh effects of third currency fluctuations. With this, Nigeria becomes the third African country to have such an agreement in place with the PBoC.”

Okorafor added that both Nigerian and Chinese officials expressed delight at the conclusion and signing of the agreement, and expressed the hope that it would boost mutually beneficial business transactions between both countries.