Bilateral Currency Swap Agreement Between Nigeria And China

The currency exchange agreement between Nigeria and China is important in many ways. With an average trading volume of around CNY1.74 billion on the first anniversary of the deal, the CBN appears to be in a huge comfort zone within the BCSA`s three-year cap of CNY 15 billion. In principle, the BCSA will allow Nigerian importers direct access to the renminbi, while Chinese importers will also have direct access to Naira without intermediate conversion into USD. For the most part, unlike the usual way of exchanging Naira for the dollar before rechanging it for the renminbi when Nigerians import goods and thus put pressure on the Naira, naira is traded directly with the renminbi. As a result, demand for the USD is expected to decline, which will reduce the pressure on the naira-dollar exchange rate. The swap agreement is a three (3) year agreement that allows both the CBN and the PBoC to exchange a maximum amount of fifteen billion Chinese yuan/Chinese yuan (CNY 15 billion) for seven hundred and twenty billion Naira (NGN 720 billion). This amount corresponds to $2.5 billion for an exchange rate of NGN305: 1,$US. Local traders said on Thursday that pressure on demand in the foreign exchange market was mounting, with some companies passing dividends after the end of the earnings season, as well as importers buying foreign goods to resell at home. The Naira fell slightly on Thursday for investors, to 361, while it was listed at 305.70 on the official market, supported by the regular intervention of the central bank.

A lender traded the currency on Thursday at Naira 314.50. at a ceremony in Beijing, China, between the Federal Republic of Nigeria (“Nigeria”) and the People`s Republic of China (“China”). CBN and the People`s Bank of China (“PBoC”) entered into the currency exchange agreement on behalf of their respective countries. In February, Britain`s export finance agency said it would add the Naira to its list of “pre-approved currencies” to finance transactions with Nigerian companies in local currency. The agreement will allow trade between the two countries to be conducted directly in their local currencies, without the dollar, and will allow the renminbi (yuan) to flow freely within the Nigerian banking system. . . .