Nigeria and China have renewed their currency swap agreement valued at 15 billion Yuan ($2 billion) in a strategic effort to strengthen economic ties and streamline trade between the two nations. The People’s Bank of China (PBOC) confirmed the extension, stating that the arrangement will remain in place for another three years, with the possibility of further renewals upon mutual agreement.
“The agreement is valid for three years and can be renewed upon mutual consent,” the PBOC said in a statement, as reported by Bloomberg.
The renewed pact allows for direct currency exchanges between the Chinese Yuan (CNY) and the Nigerian Naira (NGN), bypassing the US dollar as an intermediary. This approach reduces transaction costs and enhances market efficiency, providing a significant boost for businesses in both countries.
Initially signed in June 2018, the currency swap was introduced to ease liquidity constraints for businesses engaged in trade between Nigeria and China. The agreement originally allowed for the exchange of up to 15 billion Yuan for 720 billion Naira, equivalent to $2.5 billion at an exchange rate of NGN305 to $1.
The currency swap facility enables the central banks of both nations to inject liquidity into their financial systems through bi-weekly auctions. This mechanism supports the sale, purchase, and repurchase of naira and yuan, promoting trade and fostering bilateral investments.
Nigerian businesses importing goods from China and Chinese enterprises operating in Nigeria stand to benefit significantly, with easier access to liquidity in their respective currencies facilitating smoother operations.
Economic analysts view the renewal as a sign of deepening cooperation between the two nations. By prioritizing direct currency exchanges, Nigeria and China aim to reduce dependency on the US dollar, enhance trade flows, and drive sustainable economic growth.
This agreement aligns with broader global trends of diversifying currency use in international trade and strengthening financial independence from dominant global currencies. For Nigeria, the partnership is a step toward bolstering trade relations with one of its largest trading partners, while for China, it reinforces its commitment to expanding economic influence in Africa.
As the renewed agreement takes effect, both nations are poised to leverage its benefits to foster mutual economic development and enhance financial stability in their respective markets.
No comments:
Post a Comment