The Central Bank of Nigeria (CBN) says the bilateral currency swap agreement with the Peoples Bank of China (PBoC) will help the liquidity issues faced by Nigerian traders and Chinese manufacturers.
The apex bank said with the deal, Chinese businessman will have sufficient naira to purchase raw materials from Nigeria and Nigerian importers will not endure the challenge of ‘third currency’ fluctuations when trying to make payments for Chinese exports.
“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.
“Indeed, the deal will protect Nigerian business people from the harsh effects of third currency fluctuations,” CBN said in a statement.
It added that as the deal comes into effect, Nigerian manufacturers, cottage industry players and anyone who need imports from China will be able to secure RMB from Nigerian banks: “With the operationalization of this agreement, it will be 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 scarce foreign currencies.”
The CBN listed benefits of the deal to include helping both to manage their reserves better among other benefits: “It will also assist both countries in their foreign exchange reserves management, enhance financial stability and promote broader economic cooperation between the two countries.”