Nigeria’s government has stated that the currency swap between China and Nigeria which is said to have happened almost three-years ago has not yielded the expected results.
In July 2018, People’s Bank of China (PBoC) and Nigeria’s central bank made agreement on currency swap of N720 billion ($18 million). The swap was done in order to allow importation transactions to be done using Chinese Yuan instead of dollars.
The initial decision for entering into the deal was to finance investment and trade between the two countries which was expected to create some level of financial market stability. Apart from that, it was also expected to help in the facilitation of connection by both countries.
In a period of over three years since the deal was struck, it seemed that the trade between Nigeria and China is still been dominated by the use of US dollars instead.
Despite the fact that the deal has not produce any notable results as expected, both countries have gone ahead to still renew the swap deal which expired in April 2021.
Nigeria’s Minister of finance and national planning, Zainab Ahmed during an interview had mentioned that Nigerians do not really understand how the policy works because it was not well presented to them.
Ahmed said “the currency swap between Nigeria and China (it) has not worked the way Nigerians had expected, but it is still working. Maybe it wasn’t presented well enough for people to even know what it was. “What it is is that you are able to order goods from China and pay with the Chinese currency instead of paying in dollars and then converting to the Chinese currency (Yuan).
“So, people that are doing large volume trade through the official banking channels are taking advantage of that. So, the currency swap is still in place, it is working. Maybe the volume will increase over time and more Nigerian companies will be able to access it.”
In a bid to accelerate the currency swap with China, there might still be an expansion of the credit line so as to allow more volume of Naira-Yuan swap.
The minister stated that, “I think there is a lot that can be done and I’m sure the monetary authorities are also looking very much at that, because this has now been going on for some time.
“Like I said, it is like having a credit line that you can trade for up to a certain volume. Maybe they will be reviewing and increasing that volume and also perhaps reducing the requirement for complying to be able to participate in that scheme. And I will say that the monetary authorities are in the best position to provide what needs to be done going forward to expand that scheme.”
According to a report of Nigeria’s Central Bank Financial Market mid-year Report in 2021, there it was revealed that 337.23 billion Naira has been sold since the beginning of the agreement up until the end of June 2021. This was at the conversation of N64.88 exchange rate