China and Nigeria have renewed a currency swap arrangement worth 15 billion yuan ($2 billion) to boost bilateral commerce and investment.
According to the People’s Bank of China, the agreement is likely to strengthen financial cooperation and encourage the wider use of the yuan and naira in bilateral transactions, as reported by Bloomberg and Chinese local media on Friday.
The renewed currency swap agreement is expected to strengthen economic connections, improve cross-border commerce, and boost investment by lowering reliance on third-party currencies such as the US dollar, according to the bank.
The currency-swap mechanism was initially formed in May 2018 when the Central Bank of Nigeria and the People’s Bank of China signed a contract worth RMB 16 billion (about $2.5 billion).
The agreement was signed by Godwin Emefiele, the suspended CBN governor, and Yi Gang, the former PBoC Governor.
The initial deal was designed to enable industrialists and businesses in both countries to directly access the yuan and naira, reducing the need for third-party currencies such as the US dollar.
In September, President Bola Tinubu met with President Xi Jinping of China, and both leaders agreed to encourage flexible and diverse regional monetary and financial cooperation, such as local currency swaps, to facilitate trade between the two nations.
The leaders also discussed how currency-swapping measures can help to maintain global financial stability.
With trade between Nigeria and China accounting for over 30% of total trade, the two countries agreed to strengthen international financial intelligence collaboration, with a focus on anti-money laundering and counter-terrorism financing.
