Nigeria has reportedly renewed a currency swap deal worth $2 billion with China in a bid to strengthen bilateral trade and investment between both countries.
As reported by Bloomberg, the renewal of the currency swap deal of $2 billion (15 billion yuan) was confirmed by the People’s Bank of China on Friday.
The currency deal involves providing naira liquidity to Chinese businesses and yuan liquidity to Nigerian businesses, in order to reduce both parties’ dependence on the dollar for transactions.
The deal was first signed in April 2018 for a period of three years amid dollar shortages in Nigeria. However, “the agreement is valid for three years and can be renewed upon mutual consent,” according to the People’s Bank of China as quoted by Bloomberg.
The new deal will expand the use of naira and yuan in business transactions between both countries, strengthening financial cooperation.
China-Nigeria relationship
- China is Nigeria’s biggest trading partner ahead of the US. The global economic giant imports Nigeria’s crude oil, petroleum gas, and lead ore, among other products
- Nigeria imports numerous manufactured goods from China, especially vehicles and electronics.
- Bloomberg noted that in 2023, Nigeria imported $11.2 billion worth of goods and services from China and exported goods worth $2.4 billion to the Asian country.
Nairametrics reported that the volume of trade between Nigeria and China, reached $22.6 billion in 2023, quoting Vice President Kashim Shettima.
The Vice President disclosed this in November at the Presidential Villa, Abuja, while receiving a delegation from China led by Vice Chairman of the Standing Committee of the Chinese National People’s Congress, Mr Zhang Qingwei.
Shettima added that the trade relationship between Nigeria and China is growing by 33% every year.
What you should know
China is arguably Nigeria’s biggest development partner in the world with some landmark infrastructure in Nigeria credited to partnerships with and funding from China. A recent partnership between both countries is focused on renewable energy, smart city development, and critical infrastructure projects.
- Forex scarcity is usually a challenge for cross-border transactions in Nigeria, until last year, when the Central Bank of Nigeria allowed the local currency to trade more freely against the dollar.
- The new deal between China and Nigeria is expected to reduce the local demand for dollars in Nigeria.
- However, it is left to be seen how it would shape other bilateral relations such as that with the United States, which is a major rival of China and another big trading partner of Nigeria.
President-elect Donald Trump, who will be inaugurated in January 2025, has threatened to impose trade tariffs on members of the BRICS bloc of Global South nations if they “back any other Currency to replace the mighty U.S. Dollar.”
