The Central Bank of Nigeria and the People’s Bank of China entered into a currency swap arrangement in 2018 with the intention to reduce pressure on Nigeria’s external reserves as well as ensure foreign exchange stability. Despite the progression of this agreement, the Nigerian currency, the naira, has seen minimal benefit as the value has continued to depreciate.

The exchange rate between the naira and the US dollar has declined from 305 nairas per dollar to over 730 nairas per dollar and the naira to Chinese yuan rate has slumped from 48 nairas to CNY1 to 66.7 nairas to CNY1. Reports have suggested that the currency swap arrangement with China has not been successful in curbing the naira's declining exchange rate due to a profound trade imbalance between the two countries.

Nigeria imports a substantial amount of goods and services from China, whereas exports remain dismal and have been decreasing. According to Taiwo Oyedele, the head of tax and corporate advisory services at PWC Nigeria, an initiative to substitute domestically produced alternatives or promote exports could be the ultimate solution. Despite not achieving the expected results, Nigeria is not the only country entering into such agreements with China; many countries are in the process of making similar deals.

In conclusion, the currency swap agreement with China has not been able to help the Nigerian currency in its fight against depreciation, as an overwhelming trade imbalance exists between the two countries. Nigeria still has the option to look into domestic production and its exports to alleviate the pressure on its currency. Nevertheless, the agreement does reflect the wide appeal of similar deals with China across the globe.



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