Nigeria and China have renewed their 15 billion yuan ($2 billion) currency swap agreement, extending the arrangement for another three years to strengthen economic cooperation and boost bilateral trade.

The People’s Bank of China (PBOC) confirmed the renewal in a statement on Friday, noting that the agreement, initially signed in June 2018, can be extended further by mutual consent.

The currency swap allows for the direct exchange of Chinese yuan and Nigerian naira, eliminating the need for US dollars in transactions and reducing trade costs. The facility was originally introduced to address liquidity challenges faced by businesses in both countries and to promote trade in local currencies. Under the deal, up to 15 billion yuan can be exchanged for 720 billion naira, facilitating smooth transactions and investments between the two nations.

The agreement also enables the central banks of Nigeria and China to inject liquidity into their financial systems through bi-weekly auctions, providing yuan for Nigerian businesses trading with China and naira for Chinese firms operating in Nigeria. This mechanism enhances market efficiency and supports bilateral investments.

As one of China’s largest trading partners in Africa, Nigeria plays a significant role in the economic relationship, with trade volumes between the two countries exceeding $22.6 billion in 2023. Nigeria exports crude oil and agricultural products to China, while Chinese goods, including electronics and construction materials, dominate Nigerian markets.

The renewal of the swap deal comes amid Nigeria’s efforts to stabilize the naira, which has depreciated significantly following the liberalization of its exchange rate earlier in 2024. By improving access to yuan, the agreement is expected to ease pressure on Nigeria’s dollar reserves and strengthen its trade position with China.

This move highlights the growing economic ties between Nigeria and China, emphasizing the shift towards direct currency exchanges to reduce reliance on the US dollar and foster cross-border trade.