Central Bank of Nigeria (CBN) Governor, Mr. Godwin Ifeanyi Emefiele, has expressed optimism that the agreement reached between Nigeria and China last week on a currency swap will strengthen the naira and help reduce the strong demand for the US dollar in the country.
During Buhari’s visit to Beijing, the Industrial and Commercial Bank of China Ltd (ICBC), the world’s biggest lender, and Nigeria’s central bank signed a deal on yuan transactions.
“It means that the renminbi (yuan) is free to flow among different banks in Nigeria, and the renminbi has been included in the foreign exchange reserves of Nigeria,” Lin Songtian, Director General of the African Affairs Department of China’s foreign ministry, told reporters.
The agreement was reached following a meeting between Buhari and Chinese President Xi Jinping.
The move came after Finance Minister, Mrs. Kemi Adeosun, said recently that Nigeria was looking at Chinese panda bonds – yuan-denominated bonds sold by overseas entities on the mainland – adding that they would be cheaper than Eurobonds.
Nigeria’s central bank has said it plans to diversify its foreign exchange reserves away from the dollar by switching a stockpile into yuan. It converted up to a tenth of its reserves into yuan five years ago.
Lin said a framework on currency swaps had been agreed with Nigeria, making it easier to settle trade deals in yuan.
Throwing more light on the currency swap, Emefiele said that Nigeria was not the only country that had agreed to a currency swap with China, as several other countries – developed and emerging markets – with growing trade volumes with China had entered into similar currency swaps with the Asian country.