The Central Bank of Nigeria (CBN) Thursday announced the execution of a bilateral currency swap agreement with the Peoples Bank of China (PBoC).
The transaction, which is valued at Renminbi (RMB) 16 billion, or the equivalent of about $2.5 billion, is aimed at providing adequate local currency liquidity to Nigerian and Chinese industrialists and businesses, thereby reducing the difficulties encountered in the search for third currencies for payment for goods and services.
Godwin Emefiele, the CBN governor led the apex bank officials at the signing ceremony in Beijing Friday, April 27, 2018, with Yi Gang, PBoC governor, leading the Chinese team.
The signing of the agreement, according to a statement from the apex bank, is a culmination of over two years of painstaking negotiations by both central banks.
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The agreement is expected to 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.
“With the operationalisation of this agreement, it will be easier for most Nigerian manufacturers, especially small and medium enterprises (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 scarce foreign currencies,” the CBN statement read.
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.
Nigeria is the third African country to have such an agreement in place with the PBoC. Both the Nigerian and Chinese officials expressed delight at the conclusion and signing of the agreement and expressed the hope that it would boost mutually beneficial business transactions between Nigeria and the Peoples Republic of China.