The Central Bank of Nigeria (CBN) has announced the execution of a $2.5billion bilateral currency swap agreement with the Peoples Bank of China (PBoC).
Godwin Emefiele, CBN Governor, led the Nigerian officials while Yi Gang, PBoC Governor led the Chinese team at the official signing ceremony in Beijing, China, on Friday, April 27.
A statement by Isaac Okorafor Acting Director of CBN Corporate Communications, revealed that the deal was sealed after over two years of painstaking negotiations by both apex banks.
The transaction, which is valued at Renminbi (RMB) 16 billion, or the equivalent of about $2.5billion, is aimed at providing adequate local currency liquidity to Nigerian and Chinese industrialists and other businesses, thereby reducing the difficulties encountered in the search for third currencies.
Okorafor noted that among other benefits, the agreement would 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.
He added that it would 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 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,” the statement read.
With this development, Nigeria becomes the third African country to have such an agreement in place with the PBoC.
Both the Nigerian and Chinese officials were delighted at the conclusion and signing of the agreement.
They were also hopeful that it would boost mutually beneficial business transactions between the two countries.