China and Nigeria have renewed their bilateral currency swap agreement, valued at about 15 billion Chinese yuan (approximately $2 billion or over ₦3 trillion).

This agreement allows both countries to trade and settle transactions directly in their local currencies and that means Chinese yuan and Nigerian naira.

The approach bypasses the US dollar as an intermediary.

The swap agreement, initially signed in 2018 and renewed in December 2024, is valid for three years. It aims to strengthen financial cooperation, expand currency use, and facilitate bilateral trade and investment.

It reduces Nigeria’s dependency on the US dollar, easing foreign exchange pressures on the naira and helping stabilize its value.

Nigerian businesses can use the yuan for imports from China and vice versa. Chinese businesses can use naira in Nigerian transactions, cutting transaction costs and simplifying trade settlements.

The agreement supports increased liquidity of yuan in Nigerian markets and naira in Chinese markets, promoting smoother trade finance.

China is Nigeria’s largest trading partner, accounting for about 35% of Nigeria’s total imports with bilateral trade volume reaching $11.58 billion by end of 2024.

The Nigerian maritime sector benefits indirectly through faster port clearances and trade financing supported by Chinese-backed infrastructure projects.

Peer-to-peer (P2P) Forex trading platforms have enabled Chinese traders to collect naira directly instead of dollars. This has contributed to the recent gains of the currency and naira stability in informal markets.

China’s acceptance of the Nigerian naira for bilateral trade through this currency swap agreement marks a strategic shift. It targets a reduction of dollar dependence, improving Nigeria’s foreign exchange stability, lowering trade costs, and deepening economic ties.