CBN repays CNY5.10bn in Nigeria-China currency swap agreement
The Central Bank of Nigeria (CBN) has made a significant repayment towards the Nigeria-China currency swap agreement, with 5.10 billion Chinese yuan (CNY) already repaid out of the 6 billion utilised. This repayment comes as the agreement is expected to be renewed next year.
The CBN revealed this information in response to a Freedom of Information (FOI) request made by Femi Falana, a prominent human rights lawyer, in June 2023.
Falana had requested the CBN to disclose the details of the currency swap agreement.
The currency swap agreement between Nigeria and China was initiated in July 2018 and expired in April 2021, before being renewed.
Under the agreement, Nigeria had access to an overdraft amount of CNY 15.00 billion within the year.This repayment by the CBN demonstrates Nigeria’s commitment to fulfilling its financial obligations and maintaining a positive relationship with China.
The currency swap agreement has provided Nigeria with a valuable tool for conducting trade and investment activities with China, as it allows for direct currency exchanges between the two countries, reducing the reliance on third-party currencies.
The renewal of the agreement next year will likely bring further benefits to Nigeria, as it will continue to facilitate smoother trade transactions and strengthen economic ties between the two nations.
The CBN’s repayment is a positive development that showcases Nigeria’s responsible financial management and commitment to honoring its agreements.
“Since its renewal, CNY9.00 billion had been drawn, CNY6.00 billion utilised and CNY3.00 billion outstanding, and out of the CNY6.00 billion utilised, the sum of CNY5.10 billion had been repaid, while the sum of CNY2.10 billion had not been utilised, leaving the sum of CNY900.00 million yet to be repaid. Furthermore, the next renewal is expected to take place in 2024,” the CBN said in response to Falana.
The currency swap agreement between Nigeria and China, which was signed in April 2018, has raised concerns as the federal and state governments, as well as the business community, have been unable to transact business in naira and yuan.
The agreement, led by Godwin Emefiele, the suspended Governor of the Central Bank of Nigeria (CBN), and Yi Gang, the Governor of the People’s Bank of China (PBoC), aimed to provide sufficient local currency liquidity to Nigerian and Chinese businesses, thereby reducing the challenges faced in finding third currencies.
This agreement makes Nigeria the third African country to have such a deal with the PBoC.
The agreement provides naira liquidity to Chinese businesses and renminbi liquidity to Nigerian companies, improving the speed, convenience and volume of transactions between the two countries.
It also assists both countries in their foreign exchange reserves management, enhances financial stability and promotes broader economic cooperation between the two countries.
The signing of a currency swap agreement between Nigeria and China has raised concerns about the limited use of the naira and yuan in transactions.
The agreement, which was signed in Beijing on April 27, 2018, by officials from the Central Bank of Nigeria (CBN) and the People’s Bank of China (PBoC), aimed to provide local currency liquidity to businesses in both countries.
However, there have been reports that federal and state governments, as well as the business community, have been prevented from conducting transactions in naira and yuan.
The deal, which took over two years of negotiations, was intended to reduce the difficulties faced by Nigerian and Chinese businesses in finding third currencies for transactions.
The currency swap agreement is expected to improve the speed, convenience, and volume of transactions between Nigeria and China, as well as enhance financial stability and promote broader economic cooperation.
