CBN Signs Currency Swap Deal With China
It is no longer news that China and Nigeria are hobnobbing.
On Thursday, the Central Bank of Nigeria, CBN said it has signed a currency swap agreement with China.
The agreement will allow the two sides to swap a total of 15 billion Chinese yuan, about 2.35 billion dollars, for 720 billion Nigerian naira, or vice versa, within the next three years.
The People’s Bank of China has also confirmed this deal on its website.
The move is aimed at facilitating bilateral trade and investment and promoting the financial stability of both sides, the PBOC said.
The deal can be extended by mutual consent.
So, what exactly is a currency swap?
It is a deal that allows two institutions to exchange payments in one currency for equivalent amounts in the other to facilitate bilateral trade settlements and provide liquidity support to financial markets.
This means that Nigerian businessmen can now get Chinese Yuan from the CBN to conduct business transactions in China.
Chinese businessmen can also get the Nigerian naira from the People’s Bank of China to conduct business transaction in Nigeria.
Recall that in 2014, the then CBN deputy governor, Kingsley Moghalu, said the bank was looking to increase the percentage of Yuan foreign reserves in its possession from 2% to 7%.
According to him, 85% of its foreign reserves were in dollars and it needed to have more in Chinese Yuan, as the country is taking a more prominent place in global trade.
“It was clear to us that the future of international economics and trade will shift in large part to business with and by China. Ultimately the renminbi (Yuan) is likely to become a global convertible currency,” Moghalu had said.
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