Nigeria Renews Currency Swap Deal with China, Access to Yuan for Banks
Nigeria has renewed its currency swap deal with China, allowing Nigerian banks to access yuan through the Central Bank of Nigeria (CBN). This move enables businesses to open Letters of Credit in yuan for Chinese imports, reducing the demand for dollars and exchange rate volatility.
The yuan, China’s currency, has gained recognition as a reserve currency on the global stage. In 2016, the International Monetary Fund (IMF) added the yuan to its Special Drawing Rights basket, alongside major currencies like the US dollar, euro, yen, and pound sterling.
By conducting more trade in yuan, Nigerian businesses can avoid the additional costs associated with converting naira to dollars and then to yuan. This shift in currency preference could help stabilize the exchange rate and mitigate inflation in the Nigerian economy.
