A Nigerian economist said the country’s five-year-old currency swap deal with China has not eased pressure on Nigeria’s currency.Big trade imbalance between Nigeria and China hinders implementation of swap deal, one expert says
Relieve pressure on Naira
A five-year currency swap agreement between Nigeria and China has failed to ease the pressure on the naira, according to Nigerian economic experts. The agreement, signed between the Central Bank of Nigeria (CBN) and the People’s Bank of China (PBOC), also aimed to reduce pressure on Nigeria’s foreign exchange reserves and ensure foreign exchange stability.
However, since signing the swap agreement in 2018, Nigeria’s currency has fallen against the dollar from N305:$1 in 2018 to more than N460:$1 in the first week of April 2023. Exchange rate from N48:CNY1 to N66.70:CNY1 on 04/06/2023. In the foreign exchange parallel market, a major source of dollars for many Nigerian businesses and individuals, the Naira/dollar exchange rate was reportedly above N730. $1.
There have been reports of failed currency swap agreements while several countries have or are trying to establish similar agreements with China.
Taiwo Oyedele, head of PWC Nigeria’s tax and corporate advisory services, explained why a currency swap deal with China seems unable to stop the Naira from declining, pointing to trade imbalances between the two countries.
“It has been difficult to implement so far due to the trade imbalance between Nigeria and China. In addition to being historically volatile, it is actually trending downward,” Oedel said.
Oyedele said Nigeria could improve the situation by substituting or promoting locally sourced alternatives to imported goods.
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