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Nigeria, China Finally Sign $2.5b Currency Swap Deal

By Dipo Olowookere

The Central Bank of Nigeria (CBN) has finally signed the much-awaited currency swap deal with the People’s Bank of China (PBoC).

According to a statement issued by spokesman of the CBN, the deal is worth $2.5 billion (about N720 billion or 15 billion Chinese Yuan) and is valid for three years, but can be renewed if both parties agree to extend it.

CBN Governor, Mr Godwin Emefiele, led his team to the PBoC Governor, Dr Yi Gang at the official signing ceremony held in Beijing, China, on Friday, April 27, 2018, after a culmination of over 2 years of painstaking negotiations by both central banks.

“With this, Nigeria becomes the third African country to have such an agreement in place with the PBoC,” Mr Okorafor said.

The CBN said this agreement will provide Naira liquidity to Chinese businesses and provide RMB liquidity to Nigerian businesses respectively, thereby improving the speed, convenience and volume of transactions between the two countries.

Also, the currency swap is aimed at providing adequate local currency liquidity to Nigerian and Chinese industrialists and other businesses thereby reducing the difficulties encountered in the search for third currencies.

It will also assist both countries in their foreign exchange reserves management, enhance financial stability and promote broader economic cooperation between the two countries.

Furthermore, the deal will make it easier for most Nigerian manufacturers, especially small and medium enterprises (SMEs) and cottage industries in manufacturing and export businesses to import raw materials, spare -parts and simple machinery to undertake their businesses by taking advantage of available RMB liquidity from Nigerian banks without being exposed to the difficulties of seeking other scare foreign currencies.

The deal, which is purely an exchange of currencies, will also make it easier for Chinese manufacturers seeking to buy raw materials from Nigeria to obtain enough Naira from banks in China to pay for their imports from Nigeria.

The CBN said this will protect Nigerian business people from the harsh effects of third currency fluctuations.

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Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan.

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