This arrangement is anticipated to enhance financial collaboration and encourage the increased use of the yuan and naira in transactions between the nations, as stated by the People’s Bank of China, with reports from Bloomberg and local Chinese media on Friday.
According to the central bank's announcement, “The agreement is valid for three years and may be renewed upon mutual consent.”
The renewal of this currency-swap agreement is expected to further solidify economic relations, facilitate cross-border trade, and stimulate investment by minimizing dependence on third-party currencies like the US dollar, the bank noted.
The currency-swap framework was initially established in May 2018, when the Central Bank of Nigeria and the People’s Bank of China entered into a deal worth 16 billion renminbi (around $2.5 billion).
This agreement was signed by Godwin Emefiele, the suspended governor of the Central Bank of Nigeria, and Yi Gang, the former governor of the People’s Bank of China.
The original deal aimed to provide industrialists and businesses in both nations with direct access to the yuan and naira, thereby reducing the necessity for third-party currencies such as the US dollar.
This agreement aims to enhance naira liquidity for Chinese enterprises and RMB liquidity for Nigerian enterprises, thus facilitating faster, more convenient, and higher-volume transactions between the two nations, as stated by the CBN at the time of the agreement's signing.
In September, President Bola Tinubu held discussions with President Xi Jinping of China, where both leaders committed to promoting flexible and diverse regional monetary and financial collaboration, including local currency swaps, to support trade between their countries.
The discussions also included efforts to contribute to global financial stability through currency-swap initiatives.
Given that trade between Nigeria and China represents nearly 30 percent of Nigeria's overall trade, both nations agreed to strengthen international cooperation on financial intelligence, with a particular emphasis on anti-money laundering and counter-terrorism financing efforts.