Earlier, China`s central bank said it had signed a three-year bilateral currency exchange agreement with Nigeria worth 15 billion yuan. Under the swap agreement, contractors or companies with authentic market documents may contact one of the accredited banks to request credit facilities for the performance of the contract under the conditions to be defined in the approved guidelines. So far, he said, apart from Nigeria, only two other African countries currently benefit from the currency of the swap agreement with China. The other countries are South Africa and Egypt, two of Africa`s largest economies after Nigeria. Trade data for 2019, when the agreement enters into force, should show fairer trade relations. Unfortunately, Nigeria`s imports from China increased by 68%, from N2.9 trillion in 2018 to N4.9 trillion. The value of exports continued to rise, but by less than 60 per cent. Improved performance pushed the country`s weak export to China from N378 billion in 2018 to N596 billion in 2019. Local traders said on Thursday that demand pressures in the foreign exchange market were piling up as some companies repatriated dividends after the end of the reporting season, associated with importers buying foreign products for resale domestically.

The governor of Nigeria`s central bank and his Chinese counterpart signed the agreement, according to the statement. (Written by Chijioke Ohuocha Edited by Gareth Jones and Raissa Kasolowsky) BcSA, which is gaining more and more popularity as a trading intermediary, is an agreement between two parties, which could be countries in which the parties exchange a principle and interest of one currency for a principle and interest of another currency, with the intention of obtaining a better agreement. This saves the parties the cost and stress of going through the foreign market to process transactions. Balikis Suleiman, a household goods and electronics retailer that also imports from China to Abuja, also commented that the use of international financial payment systems and payment colonists brings them much more than the trade bottleneck. As a follow-up to its renminbi cross-border comparison pilot project, China launched an aggressive currency swap agreement in 2020 that resulted in a pact with Argentina, Belarus, Brazil, Canada, Hong Kong, Iceland, Indonesia, Malaysia, Singapore, South Korea, Thailand, the United Kingdom and a few others. This has led to a steady growth in the adoption of the renminbi as an alternative global currency. The swap agreement had the potential to improve the country`s foreign exchange position, as China accounts for a large portion of our imports. However, implementation has always been a major obstacle for the Nigerian government, and this policy has not proven to be an exception, another failed policy. In 2018, imports from China accounted for 25.12% of total imports into the country, while China was not among the top ten (10) export destinations for Nigerian products. In 2019, there was a drop to 20.49%, which contradicted analysts` expectations, as goods from China were expected to be cheaper after the currency swap deal, thereby increasing our imports from the country.

Although the idea was first touted between 2011 and 2014 under the Goodluck Jonathan regime, the main selling point of the Nigeria-China currency exchange agreement came in 2016, when a newly created government of Muhammadu Buhari again floated the idea of boosting local production through faster and cheaper access to Chinese technology, including machines. Two years after the start of the widely publicized deal, Nigeria is still dependent on cheaper Chinese products, as local production has not yet come into effect. « These categories of companies will use the RMB liquidity available from Nigerian banks under the swap agreement to track their operations without facing the problems of searching for other rare foreign currencies that result in higher interest costs, » the CBN spokesperson said. According to him, the dollar has remained the dominant import currency since its inception, making it impossible for Nigerians to benefit from the deal. According to the CBN governor, the agreement would make the naira available to Chinese companies. In return, the supply of Chinese currency (RMB) to their Nigerian counterparts would be guaranteed to increase the speed, convenience and volume of transactions between the two countries. This, according to Uche Uwaleke, a professor of capital markets at Nasarawa State University, Keffi, could not be unrelated to the relatively small size of the 180 billion yuan swap. « Under the Sino-Nigerian swap agreement, Nigerians will see Chinese suppliers issue invoices in renminbi (RMB) (Chinese currency) and enter into contracts in the same currency based on negotiations with Nigerian importers. » Nigeria suffered a chronic shortage of dollars after oil prices plummeted in mid-2014, plunging its economy into recession and hammering its foreign exchange reserves, frustrating individuals and businesses that could not import goods into the country. The target of 720 billion naira to 15 billion The renminbi, which is to be traded in three years, has not been reached, traders and importers still have to pay in US dollars, then the yuan for business transactions with Chinese companies, which is expensive, which leads to a steady increase in the prices of raw materials imported from China, because operating costs are passed on to end users, leading to increased inflation. In addition, the value of the naira against the US dollar continues to depreciate (sale at N528/USD on the BDC market from September 2, 2021). The CBN said it had sold 1.45 billion yuan since the start of currency exchange with China and the end of 2019.

After the implementation of the initiative, the value of the national currency, among other things, reacted to the news. The naira was sold at N48.6/CNY in January 2018 before the announcement, it rose 494 basis points (4.94%) after the signing and announcement of the deal. It continued to appreciate by +8.23% at the end of the year (2018). « I have been involved in tyre imports for a long time and we are ahead of the game. Our clients in China would not need this bottleneck of the swap agreement, so the familiar US Forex dollar is still what our financial agents use. Therefore, analysts say the currency swap offers good prospects for economic growth and continues to keep Nigeria ahead of others as Africa`s largest economy. The agreement makes Nigeria the third country in Africa (after South Africa and Egypt) to sign such an agreement with China. Although much of the operationalization of the swap agreement is not publicly available, traders and importers have shared their experiences in accessing Forex for their companies. However, he said that given the huge trade imbalance with the country, it would be difficult for Nigeria to derive adequate benefits from the swap agreement, as Chinese exports account for about 80 percent of the total volume of bilateral trade.

He wondered why, two years after its implementation, there is not much information in the public space about the implementation of the currency swap agreement with China. He called on the CBN to ensure an adequate assessment of the pros and cons of the deal for Nigeria before considering its renewal. With one year up to the three-year contract, experts still believe that the agreement was not necessary. Foreign exchange activity between Nigeria and China is not an isolated case. Cross-currency swaps are part of the renminbi`s overall global trade strategy and internationalization program. .