In February, Britain`s export finance agency said it would add the Naira to its list of “pre-approved currencies” to finance transactions with Nigerian companies in local currency. The swap facility amounts to RMB 15 billion/NGN 720 billion. The contract is valid for three years and can be renewed by mutual agreement. Nigeria suffered from a chronic shortage of dollars after oil prices collapsed in mid-2014, plunging its economy into recession and hammering its currency reserves, frustrating individuals and businesses that could not import goods into the country. Since the creation of the BCSA, opinions have so far differed on the implementation of the agreement. Billy Gillis-Harry, Chairman of the South-South Coalition In this context, the Central Bank of Nigeria (CBN) has concluded a bilateral currency exchange agreement (BCSA) with the People`s Bank of China (PBoC). This agreement was finally signed on Friday, April 27, 2018 and makes Nigeria the third African country to conclude a currency exchange agreement with the People`s Bank of China. They also note that the NGN/CNY swap agreement will be particularly favourable to Nigeria`s foreign exchange reserves. Despite the concerns expressed, we believe that the currency swap agreement is a step in the right direction. The decline in dollar demand, which is expected to be achieved through the swap agreement, will complement CBN`s current intervention through the FX Window on behalf of investors and exporters to deepen market stability by limiting the impact of dollar scarcity and exchange rate volatility. We also note that the NGN/CNY swap agreement will be particularly favourable to Nigeria`s foreign exchange reserves, which have steadily increased since a certain degree of stability has returned to the country`s daily crude oil production and international oil prices have begun to move northward.
Finally, the elimination of the intermediate currency will reduce the costs and opportunity costs associated with importing from China, which will affect the prices of goods and services in the country and domestic inflation. With an average trading volume of around CNY1.74 billion on the first anniversary of the deal, the CBN appears to be in a huge comfort zone within the BCSA`s three-year cap of CNY 15 billion. Both the governor of the Central Bank of Nigeria and the Chinese counterpart signed the agreement, he said. (Written by Chijioke Ohuocha Writing by Gareth Jones and Raissa Kasolowsky) “The transaction. . . .