- Nigerian and Chinese companies will no longer require Dollars as trade between both countries will be supported by Renminbi (RMB) .
These are good times for Nigerian and Chinese companies as trade between both countries will no longer require Dollars.
The good news is coming after the execution of a bilateral currency swap agreement between the Central Bank of Nigeria (CBN) and the Peoples Bank of China (PBoC).
The governor of Central Bank, Godwin Emefiele has signed the currency swap agreement on behalf of Nigeria with Yi Gang, the governor of Peoples Bank of China on behalf of China.
The currency swap deal, which has taken two years of negotiation, is valued at 16 billion Renminbi (RMB) which is an equivalent of $2.5billion.
Speaking on the agreement, Isaac Okorafor, CBN spokesman said: “The deal, which is purely an exchange of currencies, will also make it easier for Chinese manufacturers seeking to buy raw materials from Nigeria to obtain enough naira from banks in China to pay for their imports from Nigeria. Indeed, the deal will protect Nigerian business people from the harsh effects of third currency fluctuations.”
With currency swap deal, Nigeria becomes the third African country to have such an agreement in place with China.
Effect of $2.5billion currency swap deal
After the agreement signing, the deal will provide the Chinese and Nigerian currencies directly to industrialists and other businesses from both countries.
The agreement will also reduce the difficulties acquiring third currencies - Dollars, Euros and Great Britain Pounds - according to the CBN spokesman.
Okorafor further said: “Among other benefits, this agreement will provide naira liquidity to Chinese businesses and provide RMB liquidity to Nigerian businesses respectively, thereby improving the speed, convenience, and volume of transactions between the two countries.
“It will also assist both countries in their foreign exchange reserves management, enhance financial stability and promote broader economic cooperation between the two countries.”
Okoroafor also said the currency swap deal will be easier for most Nigerian manufacturers, especially SMEs and cottage industries in manufacturing and export businesses, to import raw materials, spare-parts and simple machinery to undertake their businesses by taking advantage of available RMB liquidity from Nigerian banks without being exposed to the difficulties of seeking other scare foreign currencies.