(Bloomberg) -- China and Nigeria have renewed a 15 billion yuan ($2 billion) currency-swap arrangement designed to boost trade and investment between the two countries.
The facility will help strengthen financial cooperation and expand the use of the two currencies, the People’s Bank of China said in statement on Friday. “The agreement is valid for three years and can be renewed upon mutual consent,” it said.
The Central Bank of Nigeria did not immediately respond to request for comment.
China and Nigeria first signed the deal in April 2018 for a period of three years amid dollar shortages in the West African nation. China is Nigeria’s biggest trading partner ahead of the US. It imported $11.2 billion of goods and services from China and had exports worth $2.4 billion in 2023.
The currency deal aims to provide naira liquidity to Chinese businesses and yuan liquidity to Nigerian businesses, while reducing their dependence on the dollar as a basis for transactions.
Hardening a relationship designed to circumvent the dollar could antagonize president-elect Donald Trump. Last month he threatened steep trade tariffs against members of the BRICS bloc of Global South nations if they “back any other Currency to replace the mighty U.S. Dollar.” China is member of the bloc. Nigeria currently is not, though it has aspirations to join.
Africa’s most populous nation has suffered significant dollar shortages until last year, when the central bank allowed the local currency to trade more freely against the dollar.
While liquidity in the foreign-exchange market has improved since Nigeria ended its currency peg, the naira has remained under pressure, losing 70% of its value since the regime was relaxed. By reducing local demand for dollars in Nigeria, the facility could also help support the naira.
--With assistance from Ruth Olurounbi.
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