Nigeria: Another Look At the China Currency Swap

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By Tony Okechukwu               
                              .                                                   
After over two years of engagement, the Central Bank of Nigeria, CBN, has finally executed the currency swap agreement with the Peoples Bank of China, PBoC. It was a $2.5 billion or Renminbi, RMB, 16 billion or over N900 billion worth of bilateral currency swap aimed at boosting foreign currency liquidity in both economies, especially Nigeria's.
                                                       
Some key benefits of the deal include providing Naira liquidity to Chinese businesses as well as providing RMB liquidity to their Nigerian counterparts in return, to improve the speed, convenience and volume of transactions between the two countries.
                                                           
But more important is the expected easing of pressure on foreign currency reserves and exchange rate in Nigeria. This may not be so critical now that foreign reserve is on bumper profile but when placed at the time the idea was conceived, Nigeria really needed such agreement to stay alive in international trade.
                                                     
Bilateral trade volume between Nigeria and China was about $12.3 billion between January and November 2017. Nigeria is the second biggest importer of Chinese products and its third largest trading partner in Africa.

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