After two years of sustained and rigorous negotiations, the Central Bank of Nigeria (CBN) has finally entered into a currency swap agreement with the Peoples Bank of China (PBoC).
A statement signed by CBN's acting Director of Corporate Communications, Mr. Isaac Okorafor, said the deal, signed last Friday by Governor of the CBN, Mr. Godwin Emefiele, and PBoC Governor, in Beijing, China, ended over two years of painstaking negotiations by the apex banks.
"The transaction, which is valued at Renminbi (RMB) 16 billion, or the equivalent of about $2.5bn, is aimed at providing adequate local currency liquidity to Nigerian and Chinese industrialists and other businesses thereby reducing the difficulties encountered in the search for third currencies," the statement said.
Among other benefits of the deal, CBN said are; to "provide naira liquidity to Chinese businesses and provide RMB liquidity to Nigerian businesses respectively, thereby improving the speed, convenience and volume of transactions between the two countries.
"It will also assist both countries in their foreign exchange reserves management, enhance financial stability and promote broader economic cooperation between the two countries," it said.
It noted that "with the operationalisation 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 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," it explained further.
"Indeed the deal will protect Nigerian business people from the harsh effects of third currency fluctuations" the statement noted adding that "with this, Nigeria becomes the third African country to have such an agreement in place with the PBoC."