Nigeria and China agreed on a currency-swap worth $2.4 billion to boost commercial ties and reduce the need to use the dollar in bilateral trade.
Yi Gang, governor of the People’s Bank of China, and Godwin Emefiele, his Nigerian counterpart, signed a three-year swap of 15 billion yuan or 720 billion naira in Beijing on April 27, the Chinese central bank said in a statement Thursday. The transaction can be renewed if both parties want, it said.
The deal, more than two years in the making, will “provide naira liquidity to Chinese businesses and provide renminbi liquidity to Nigerian businesses respectively, thereby improving the speed, convenience and volume of transactions between the two countries,” the Central Bank of Nigeria said in a separate statement. It will allow Nigerian companies to import spare parts and raw materials from China by sourcing renminbi from local banks and help them avoid “the difficulties of seeking other scarce foreign currencies,” it said.
China is Nigeria’s second-biggest trading partner after the U.S., with volumes between the two totaling $9.2 billion in 2017, according to data compiled by Bloomberg. Nigeria runs a deficit, importing $7.6 billion of goods including textiles and machinery from China and exporting just $1.6 billion, mainly oil and gas.
Nigeria suffered dollar shortages after the 2014 crash in oil prices, which battered the OPEC member’s economy. Those foreign-exchange scarcities have eased in the last year thanks to an almost 45 percent rise in Brent crude prices to $72.91 a barrel and an increase in portfolio investments.
Nigeria attracted fund inflows by opening a currency-trading window for foreign investors known as Nafex, in which the naira was allowed to weaken. The currency-swap with China was calculated at the Nigerian central bank’s official rate for the naira of around 305 per dollar, rather than the Nafex rate of 360.5.
China has signed several currency-swaps with emerging markets. In 2015, it agreed a three-year swap worth $4.8 billion with South Africa.