Nigeria-China currency swap deal fails to ease pressure on Naira Bitcoin News

Nigerian economic experts have said the country’s five-year currency swap deal with China has not eased pressure against the Nigerian currency. According to one expert, the implementation of the swap deal is being held back by the size of the trade imbalance between Nigeria and China.

Relieving pressure on the Naira

According to Nigerian economic experts, the five-year currency swap agreement between the country and China has failed to ease pressure on the naira. Signed between the Central Bank of Nigeria (CBN) and the People’s Bank of China (PBOC), the deal was also intended to reduce pressure on Nigeria’s foreign reserves and ensure currency stability.

However, since the signing of the swap agreement in 2018, the Nigerian currency has depreciated against the dollar from N305:$1 in 2018 to more than N460:$1 in the first week of April 2023. Against the yuan, the Nigerian currency slid from the 2018 exchange rate from N48:CNY1 to N66.70:CNY1 on April 6, 2023. In the parallel foreign exchange market, a key source of dollars for many Nigerian businesses and individuals, the exchange rate naira/dollar reportedly stood at more than N730:$1.

The reports about the failure of the currency swap agreement came at a time when several countries have or are trying to establish similar agreements with China.

Explaining why the currency swap deal with China appears to be failing to halt the naira’s decline, Taiwo Oyedele, head of corporate and tax advisory services at PWC Nigeria, pointed to the trade imbalance between the two nations.

“Until now, implementation has been challenging essentially due to the trade imbalance between Nigeria and China. While we import as much from China, we don’t export as much, which has in fact decreased on top of the relative instability in the value of the naira,” Oyedele said.

According to Oyedele, Nigeria can still remedy this situation by substituting or promoting locally produced alternatives to imports.

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Terence Zimwara

Terence Zimwara is an award-winning journalist, author and writer in Zimbabwe. He has written extensively about the economic problems of some African countries and how digital currencies can provide an escape route for Africans.