Chinese traders have allegedly started collecting Nigeria’s naira in exchange for its currency, the yuan, instead of dollars.
According to Nairametrics, forex traders attributed the recent exchange rate stability to the success of Nigeria’s currency swap agreement.
Additionally, they determined that one of the elements influencing the naira’s stability is peer-to-peer (P2P) foreign exchange trading.
Peer-to-peer international exchanges eliminate the need for middlemen like banks and foreign exchange services by giving users or individuals an internet platform to swap currencies with one another.
According to them, these elements are assisting in reducing the pressure on the naira.
In the midst of ongoing dollar shortages nationwide brought on by excessive demand for the greenback, Nigeria and China initially struck a three-year currency swap agreement in April 2018.
Nigeria’s largest trading partner is China, not the United States. In 2024, Nigeria exported commodities valued at about N3 trillion and purchased goods and services valued at N14.14 trillion from China.
The arrangement permits the People’s Bank of China (PBoC) and the Central Bank of Nigeria (CBN), who are carrying out the deal on behalf of their respective nations, to exchange up to $2.5 billion.
The CBN and PBoC were required by the regulation then issued by Nigeria’s apex bank to provide liquidity in their respective currencies for the acquisition, sale, and subsequent repurchase and resale of the Chinese Yuan against the Naira and vice versa in order to facilitate and promote trade and investments between the two nations.
The goal of the currency deal was to lessen the reliance of Chinese and Nigerian companies on the dollar as the basis for transactions by giving them access to naira and yuan liquidity, respectively.
According to reports, Nigeria and China have extended their $2 billion currency exchange agreement in an effort to boost bilateral investment and commerce.
In an effort to boost bilateral commerce and investment between the two nations, the Federal Government reportedly extended the currency swap agreement with China in December 2024, valued almost $2 billion.
Aminu Gwadebe, the president of the Association of Bureau De Change Operators of Nigeria (ABCON), told Nairametrics that new activity in the forex market, particularly China’s role, has contributed to the naira’s recent stability.
According to him, “The Chinese are now collecting Naira for Yuan, doing P2P. Go to any mining factory and you will see a Chinese man in Nigeria… There is a lot of liquidity in the market.”
Gwadebe explained that with the yuan swap deal, Nigerian businesses buying goods from China don’t really need dollars anymore. “If you go to China… all you need is yuan to settle your affairs. You don’t even need dollars. Why am I converting from Naira to dollar, dollar to yuan? No, it doesn’t make sense to me.”
On the swap deal itself, however, he admitted it’s far from perfect. “That deal has even expired… I think they are trying to renew it somehow. I don’t even follow it because I know it is already a failure.”
Another trader, Yusuf, supported this opinion by pointing out that although the Nigeria-China swap agreement was intended to lessen dependency on the US currency, its real effects are modest. “Yes, the swap agreement does have some impact on the foreign exchange, but it is not very noticeable in daily market activity.”
He went on to say that the situation is different in practice, saying that “because USD is more widely accepted worldwide, many Nigerian traders still prefer it.” Even Chinese suppliers frequently request dollars rather than yuan or naira.
When it comes to everyday needs like school fees, medical bills, or remittances abroad, Yusuf stressed that the swap barely matters: “You can’t easily walk into a BDC and buy yuan like you do with dollars, pounds, or euros. Even if yuan is available, it’s not liquid in the street market.”
Meanwhile, Bayo Onanuga, President Bola Tinubu’s Special Adviser on Information and Strategy, responded to the news by saying that his principal’s reforms had restored foreign confidence in the naira.
Taking to his X account on Tuesday, Onanuga said, “This is a salutary development for the Nigerian economy. The Tinubu reforms are making foreigners have faith in the naira.
“The Almighty US dollar is not the ultimate king here. The naira is waxing stronger as an international means of exchange.
“I also buy some items on Chinese platforms. I can confirm that they accept naira cards. El-Rufai, veteran runner Atiku Abubakar, and Peter Obi will never celebrate this development.
“They are waiting for disasters to vent their political frustration on President Tinubu.”
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