The Central Bank of Nigeria (CBN), and the Industrial and Commercial Bank of China Ltd. (ICBC) – the world’s biggest lender, on Tuesday signed an agreement on Yuan transactions for currency swap, said an official of Chinese Foreign Ministry.
Explaining the implication of the currency swap, Lin Songtian, Director General of the Foreign Ministry’s African Affairs Department, told reporters that “it means that the Renminbi (yuan) is free to flow among different banks in Nigeria and the renminbi has been included in the foreign exchange reserves of Nigeria”.
The agreement was arrived at, following a meeting between the Nigerian President, Muhammadu Buhari and Chinese President, Xi Jinping and it covers industrial activity, aviation and infrastructure investment cooperation between China, the second largest economy in the world and Africa’s most populous nation, which has struggled to stay afloat in the face of declining oil prices and an $11 billion budget deficit this year.
The Central Bank Of Nigeria has made it known that it plans to diversify its foreign exchange reserves away from the dollar by switching a stockpile into yuan, underlining the momentum behind Beijing’s drive to internationalise its currency.
“If there is demand from Nigeria, China is ready to further conduct financial cooperation,” Songtian said.
Five years ago, Nigeria changed up to a tenth of its reserves into yuan. Presently, the Government is also considering issuing Panda bonds to assist in funding a record budget as the economy of Nigeria suffers a decline in global oil prices which has led to a slash in revenues.
Lin Songtian further disclosed that there has been an agreement with Nigeria over a framework on currency swaps which makes it easier to settle trade deals using the Chinese currency. Besides Nigeria, China also has currency swap deals with other countries including Kazakhstan, Argentina and New Zealand.
The relationship between Beijing and Nigeria is growing stronger as it is with other countries across Africa. This in addition to the currency swap deal is proved by an agreement signed between the two countries to develop infrastructure and to cooperate with Nigeria. ICBC also signed agreements on manufacturing with Dangote group.