Market News

BY Adekunle Agbetiloye

China and Nigeria first established the currency-swap agreement in April 2018 for an initial three-year term, addressing dollar shortages in the country.

China and Nigeria have extended their 15 billion yuan ($2 billion) currency-swap agreement, aiming to boost trade and investment ties between the two countries, Bloomberg reported.

The arrangement is expected to boost financial collaboration and promote the use of both currencies, according to a statement from the People’s Bank of China on Friday. “The agreement, valid for three years, may be renewed upon mutual agreement,” the statement added.

China and Nigeria first established the currency-swap agreement in April 2018 for an initial three-year term, addressing dollar shortages in the country. China, Nigeria's largest trading partner ahead of the US, imported $11.2 billion in goods and services from Nigeria while exporting $2.4 billion in 2023.

The currency swap aims to provide naira liquidity for Chinese businesses and yuan liquidity for Nigerian companies, reducing reliance on the US dollar for transactions. This strategic move to sidestep the dollar could risk provoking tensions with U.S. President-elect Donald Trump.

Last month, Trump warned of steep trade tariffs against members of the BRICS bloc, should they "back any other currency to replace the mighty U.S. Dollar." While China is a BRICS member, Nigeria is not, though it has expressed interest in joining.

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Nigeria, Africa's most populous nation, has faced prolonged dollar shortages. This eased somewhat last year when the central bank allowed the naira to trade more freely against the dollar.

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Despite improved liquidity in the foreign exchange market, the naira has come under significant pressure, losing 70% of its value since the currency peg was lifted. By reducing local demand for dollars, the currency-swap facility could help stabilize the naira.