Nigeria-China’s Currency Swap Agreement, A Positive Development For Maritime Trade – CBN Governor

Nigeria-China’s Currency Swap Agreement, A Positive Development For Maritime Trade – CBN Governor.
……experts advise caution

By Ruth Sunday 

The Central Bank of Nigeria (CBN) has commended the currency swap agreement between Nigeria and China, describing it as a significant step that could enhance Nigeria’s maritime trade and alleviate foreign exchange pressures.

Nevertheless, experts have suggested that additional structural reforms are necessary to ensure that these benefits are sustainable over the long term.

At a stakeholders’ breakfast meeting, organised by the Maritime Reporters Association of Nigeria ( MARAN) in Lagos this Tuesday, CBN Governor Olayemi Cardoso, who was represented by his Special Adviser on Finance and Strategy, Mr. Anthony Ogufere, emphasized the advantages of the agreement.

Signed in 2018 and renewed in December 2024, the agreement enables trade between Nigeria and China to be conducted in naira and Chinese yuan (renminbi), eliminating the necessity of using the U.S. dollar.

Ogufere explained that this policy helps reduce the pressure on Nigeria’s dollar reserves and cuts down the cost of doing business, especially for importers and exporters.

“The swap agreement simplifies trade settlements in local currencies and enhances competitiveness
“It has significant potential to reduce shipping costs and improve efficiency in the maritime industry,” he said

As China has become Nigeria’s biggest trading partner, making up approximately 35% of imports in 2024 and a trade volume of $11.58 billion, Ogufere pointed out that significant advancements could occur in the maritime sector.

These improvements, according to him, may involve more accessible trade financing, faster port operations, and enhanced connections through Chinese-backed initiatives such as the Lekki Deep Sea Port.

Although the advantages of the swap deal outweigh the challenges, Ogufere acknowledged that there are still issues to address.

One of such issues is Nigeria’s significant trade imbalance with China, as the country imports much more than it exports. Additionally, many Nigerian businesses still prefer using the dollar over the yuan, resulting in low adoption of the Chinese currency.

To address this, Ogufere said Nigeria must do more to promote non-oil exports to China and raise awareness of the benefits of using the yuan.

He said, ” To maximise its benefits, Nigeria must boost non-oil export to China to expand the Yuan- denominated financial transactions and enhance private sector awareness.”

Taking a more cautious stance, Mr. Martins Olajide from the Nigeria-China Strategic Partnership warned that the swap deal might pose risks if Nigeria does not address its underlying economic problems.

“The swapization of our economy might stabilize transactions today, but without industrialization, value addition, and domestic production, we risk deepening our vulnerability,” he said.

The Chairman of the Customs Consultative Council, Aare Akeem Olarenwaju, cautioned about the volatility of Nigeria’s exchange rate, which he noted is driving up the cost of essential goods. He emphasized the need to inform the public about alternatives such as the yuan.

“You can’t plan with this level of instability. Exchange rate swings are pricing essential goods out of reach for everyday Nigerians,” he said.

MARAN President Mr. Godfrey Bivbere, in his welcome speech reiterated the association’s dedication to fostering discussions on important economic matters. While recognizing the potential of the swap deal to lower transaction costs and improve trade efficiency, Bivbere emphasized the importance of a balanced conversation.

“We are here not just to celebrate progress but also to critically examine policies. It’s essential to grasp both the positive effects and the potential risks linked to China’s growing economic presence in Nigeria,” he stated.

Bivbere urged stakeholders in the maritime, trade, and financial industries to consider the Nigeria-China currency swap carefully, emphasizing that sustainable advantages will come only from policies that protect national economic interests while fostering growth and competitiveness.