Forex traders in Nigeria say that the recent stability of the naira is partly due to Chinese traders now accepting Nigeria’s currency for the Chinese yuan, thanks to a currency swap agreement between the two countries. This move is reducing the demand for the US dollar and easing pressure on the naira.
According to Aminu Gwadebe, President of the Association of Bureau De Change Operators of Nigeria (ABCON), Chinese traders are increasingly accepting naira for yuan, a shift that is making a significant impact.
“The Chinese are now collecting Naira for Yuan,” Gwadebe said. “Those who know [how to do this] have removed the dollar.” He explained that Nigerian businesses importing goods from China can now deal directly in naira and yuan, skipping the need for a third currency like the dollar and avoiding exchange rate fluctuations.
OBSERVERS TIMES recalled that China is Nigeria’s biggest trading partner ahead of the US. Nigeria imported N14.14 trillion worth of goods and services from China and exported goods worth over N3 trillion in 2024.
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The deal allows both the Central Bank of Nigeria (CBN) and the People’s Bank of China (PBoC), which are executing the agreement on behalf of their respective countries, to swap a maximum amount of $2.5 billion.
As part of the regulation then released by Nigeria’s apex bank, the CBN, and PBoC were expected to make available liquidity in their respective currencies for the facilitation and promotion of trade and investments between the two countries through the purchase, sale, and subsequent repurchase and resale of the Chinese Yuan against the Naira and vice versa.
P2P Trading Also a Key Factor
Forex traders in Nigeria are attributing the recent stability of the naira to a significant shift: Chinese traders are now collecting naira instead of dollars for the Chinese yuan. This practice, facilitated by a currency swap agreement between the two countries, is directly reducing the pressure on the US dollar and helping to stabilize Nigeria’s currency.
According to Aminu Gwadebe, President of the Association of Bureau De Change Operators of Nigeria (ABCON), this development is a game-changer. “The Chinese are now collecting Naira for Yuan,” Gwadebe stated. He explained that Nigerian businesses importing goods from China can now deal directly in their local currencies, eliminating the need for the dollar as an intermediary and avoiding its frequent fluctuations. This currency swap deal, which was reportedly renewed in late 2024 for about $2 billion, was designed to provide naira liquidity for Chinese businesses and yuan for Nigerian ones, strengthening bilateral trade and reducing reliance on the greenback.
Beyond the official agreement, traders also credit the rise of P2P (Peer-to-Peer) foreign currency trade for contributing to the naira’s stability. These platforms allow individuals to exchange currencies with one another directly, bypassing traditional banks and financial institutions, which adds to market liquidity and provides cost savings.
However, not all traders are convinced of the deal’s widespread impact. Yusuf, another currency trader, remains skeptical. While he acknowledges the swap’s influence, he argues that its effect on daily market operations is not particularly strong. He points out that many Nigerian traders and even Chinese suppliers still prefer the US dollar because of its global acceptance. “Even if yuan is available, it’s not liquid in the street market,” Yusuf said, adding that the deal has little to no impact on everyday transactions like paying for school fees or medical bills abroad. The challenge remains the dollar’s widespread preference over the yuan for many.
In addition to the currency swap, Gwadebe and other traders identified Peer-to-Peer (P2P) foreign currency trading as another factor helping to stabilize the naira. P2P platforms allow individuals to exchange currencies directly with one another, bypassing traditional financial institutions like banks. This practice provides cost savings and convenience, while also contributing to the overall liquidity of the market.
Challenges Remain
Despite these positive developments, some currency traders remain skeptical about the swap deal’s full impact. Yusuf, a currency trader, pointed out that while the swap agreement is helpful, its effect on the day-to-day market is not very strong. He noted that many Nigerian traders and Chinese suppliers still prefer the US dollar because of its global acceptance.
Yusuf added that the swap deal has little influence on everyday transactions like paying for school fees or medical bills abroad. “Even if yuan is available, it’s not liquid in the street market,” he said. The swap agreement is designed to improve trade between Nigeria and China by allowing transactions in local currencies, but it still faces the challenge of the dollar’s widespread preference.
