China, Nigeria Sign Currency Swap Deal

China’s Central Bank said Thursday that it has signed a currency swap agreement with its Nigerian counterpart.

The agreement will allow the two sides to swap a total of 15 billion Chinese yuan ($2.35 billion) for N720 billion or vice versa, in the next three years, the People’s Bank of China (PBOC) said 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.

A currency swap deal 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.

In 2014, the Central Bank of Nigeria (CBN) former deputy governor, Kingsley Moghalu, said the bank was looking to increase the percentage of Yuan foreign reserves in its possession from two per cent to seven per cent.

According to him, 85 per cent of its foreign reserves were in dollars and it needed to have more in Chinese Yuan, as the country was taking a more important 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 said.