By Chris Agabi
China’s central bank and the Central Bank of Nigeria (CBN) have renewed a bilateral currency swap agreement worth 15 billion yuan (about 2.09 billion U.S. dollars), or 3.28 trillion Nigerian naira, the People’s Bank of China said in a statement.
Originally signed in June 2018, the currency swap facility was introduced to address liquidity challenges for businesses in both countries and to facilitate trade in their respective currencies.
The agreement renewed on Friday is valid for three years and can be renewed upon mutual consent, according to the statement also shared by one of the Nigeria’s presidential spokes person Mr. Bayo Onanuga.
The currency swap arrangement will strengthen financial cooperation between China and Nigeria, expand the use of the two currencies, and promote and facilitate bilateral trade and investment.
It will also reduce the pressure on the naira as some imports and exports from and to China could be concluded with both currencies rather than the dollar.
Already the FX market is reacting positively to the news as naira gained on Friday.
According to AIICO Capital Limited, FX-related transactions were executed within a range of N1,532 to N1,550 before the exchange rate settled at N1535 per greenback on Friday.
In the parallel market, the naira gained N15 on each dollar to settle at N1,655. This reduced the exchange rate gap between the official and parallel markets to N120, or 6.8% versus 7.33% the previous week.
