During the past three years the Governor of the Central Bank of Nigeria, Godwin Emefiele and the Governor of the People’s Bank of China, Yi Gang, have been in talks to facilitate a China-Nigeria currency swap agreement which has finally been signed.
The China-Nigerian currency swap deal was born out of a need to ease the way for international trade between Nigeria and China. The agreement would not only solve the problem of acquiring the right currency for trade, it would also offer traders and Small Market Enterprises a reprieve from having to change their home currency to dollars before being able to trade as they would be able to get Renminbi from any bank in Nigeria.
The currency swap agreement of $2.4 billion would last for 3 years with the option of renewal should both countries wish to continue with it. With China being Nigeria’s second biggest trade partner, the first being the United States, the currency swap agreement would serve a major role in smoothing the lines of international trade between the two countries.
The agreement signed between the 2 countries in Beijing on April 27th, entails the swap of 720 billion naira for 15 billion yuan for the sole purpose of trade between the two countries.
According to a statement released by the Central Bank of Nigeria, the agreement would make available Naira for Chinese businesses and renminbi for their Nigerian counterparts. For Nigerian businesses importing goods from China, the huddle of having to get a currency suitable for trade would be bypassed making trade easier and faster.
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Another advantage of the currency swap for Nigeria would be in the volume of trade transactions made between Nigeria and China. Data collected shows that Nigeria’s imports to China far outweighs its exports by roughly $6 billion and this currency swap agreement could balance the scales a bit by increasing Nigeria’s exports to China.
The agreement however comes with certain regulations chief among them being that the currency swap is to be used only for trade and investment purposes.
The bilateral currency swap would protect Nigerian businesses from the effects of the fluctuations common with getting a third currency for trade as well as aid in expanding the Nigerian economy.