Nigeria Turns To Yuan Once More as Currency Swap Deal with China Returns

Addis Ababa, January 4, 2025 (FMC) – The West African nation first began converting part of its external reserves into yuan in 2011 before signing its first Bilateral Currency Swap Agreement valid for three years with China in 2018, valued at 15 billion Chinese yuan (approximately $2.5 billion at the time).

Nigeria and China have renewed their bilateral currency swap agreement, three years after the initial deal expired in 2021.

The People’s Bank of China (PBOC) confirmed the renewal, which is also valued at 15 billion Chinese yuan – equivalent to N3.19 trillion.

“The agreement is valid for three years and can be extended with the consent of both parties,” the PBOC stated, adding the renewal aims to “promote bilateral trade and investment facilitation.”

China is Nigeria’s largest trading partner. In 2023, Nigeria imported $11.2 billion worth of goods and services from China, while its exports to China amounted to just $2.4 billion.

The deal renewal will allow Nigerian banks to access yuan through the Central Bank of Nigeria (CBN), enabling businesses to open Letters of Credit in yuan for Chinese imports, according to Forbes Africa.

As China’s global trade influence continues to expand, the yuan has become increasingly recognized as a reserve currency. In 2016, the International Monetary Fund (IMF) included the yuan in its Special Drawing Rights basket, alongside the US dollar, euro, yen, and pound sterling. For Nigeria, the deal could help reduce the demand for dollars, which has contributed to exchange rate volatility and inflation. Conducting more trade in yuan, businesses can avoid the added costs of converting naira to dollars and then to yuan.