Nigeria Signs 720b Naira Currency Swap Deal With China

China’s central bank announced Thursday that it has signed a currency swap agreement with Nigeria’s Central Bank.

Based on the agreement, the two sides are expected to swap a total of 15 billion Chinese yuan (2.35 billion dollars) for 720 billion Nigerian naira, or vice versa, in the next three years, the People’s Bank of China (PBOC) said on its website.

The move is aimed at facilitating bilateral trade and investment and promoting the financial stability of both sides, 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.

NAN reports that in 2014, the CBN’s deputy governor, Kingsley Moghalu, said the bank was looking to increase the percentage of Yuan foreign reserves in its possession from two per cent to seven per cent.

According to him, 85 per cent of its foreign reserves were in dollars and it needed to have more in Chinese Yuan, as the country was taking a more important place in global trade.

“It was clear to us that the future of international economics and trade will shift in large part to business with and by China. Ultimately the renminbi (Yuan) is likely to become a global convertible currency,” Moghalu said.

Since 2014, the world market has recognised the Yuan as a likely global reserve currency, a replacement for the dollar, which has led countries like Ghana, South Africa and Zimbabwe to integrate the renminbi (Yuan) into their financial markets.

As a result of this, trade (however imbalanced) has increased between certain countries on the continent and China, as well as providing a fertile ground for demand for the currency on the continent.





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