By ‘Dotun Akintomide
The signed a $2.5 billion bilateral currency swap between Central Bank of Nigeria (CBN) and the Peoples Bank of China (PBoC) will provide naira liquidity to Chinese businesses and provide RMB liquidity to Nigerian businesses respectively.
The transaction which is valued at Renminbi (RMB) 16 billion, or the equivalent of about $2.5bn is targeted at improving the speed, convenience and volume of transactions between the two countries
Confirming the swap, which has taken two years to negotiate, a statement
released Thursday by CBN spokesman Mr. Isaac Okorafor said the Governor of the CBN, Mr. Godwin Emefiele, led CBN officials while PBoC Governor, Dr. Yi Gang, led the Chinese team at the official signing ceremony in Beijing on Friday, April 27.
It will also assist both countries in their foreign exchange reserves management, enhance financial stability and promote broader economic cooperation between the two countries.
News on the swap comes at a time Nigeria’s foreign reserves have inched up to $48 billion on higher oil prices, giving the country leverage in its negotiations with the Chinese central bank.
“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,” CBN said in a statement.
It added that as the deal comes into effect, Nigerian manufacturers, cottage industry players and anyone who need imports from China will be able to secure RMB from Nigerian banks: “With the operationalization 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 listed benefits of the deal to include helping both to manage their reserves better among other benefits: “It will also assist both countries in their foreign exchange reserves management, enhance financial stability and promote broader economic cooperation between the two countries.”