The Governor of the Central Bank of Nigeria (CBN), Dr Yemi Cardoso, has described the Nigeria-China Bilateral Currency Swap Agreement (BCSA) as a strategic tool for enhancing trade efficiency, reducing transaction costs, and diversifying Nigeria’s external sector.
Cardoso’s remarks were delivered at a breakfast meeting in Lagos organised by the Maritime Reporters Association of Nigeria (MARAN) to discuss the implications of the currency swap deal.
He was represented by his Senior Special Assistant on Finance and Strategy, Mr Anthony Ogufere.
Before the implementation of the swap deal, Nigerian importers and exporters faced complex and costly currency conversion processes that exposed them to high exchange rate risks and delays.
The new framework allows for direct settlement in naira and renminbi, streamlining transactions and reducing dependence on the US dollar.
Cardoso noted that the agreement also bolsters Nigeria’s foreign exchange reserves by offering an alternative settlement channel and improving access to renminbi liquidity.
This move, he said, enhances Nigeria’s position as a credible trade partner and increases investor confidence, potentially attracting more foreign direct investment and financing for infrastructure development.
Impact on Maritime Sector
Underscoring the potential benefits for Nigeria’s maritime industry, Cardoso said the sector stands to gain significantly, as it remains the primary conduit for trade between Nigeria and China.
He noted that the Ministry of Marine and Blue Economy is already working to modernise port infrastructure, automate port processes, and strengthen the regulatory framework to align with the goals of the currency swap agreement.
These efforts are expected to reduce trade processing times and further lower transaction costs. Cardoso emphasized that allowing importers and exporters to trade in local currencies will enhance financial predictability and stability in the maritime industry.
He added that the deal could lead to reduced shipping and logistics costs across the value chain and open financing opportunities for maritime businesses such as shipping companies, offshore service providers, and fishing fleets to acquire vessels and equipment from China on favorable terms.
China, being a global leader in shipbuilding and maritime financing, is well-positioned to support such transactions.
The CBN Governor also referenced China’s involvement in Nigerian infrastructure projects, including the Lekki Deep Seaport, where China Harbour Engineering Company holds a 54% stake, financed through the China Development Bank.
He said this underscores China’s interest in Nigeria’s maritime sector and the broader economic partnership between both nations.
Challenges and Recommendations
Cardoso acknowledged some challenges associated with the currency swap deal, including Nigeria’s persistent trade imbalance with China. While imports from China have grown, exports to China remain low, primarily due to Nigeria’s heavy reliance on raw commodity exports such as crude oil and minerals.
This imbalance, he noted, limits the country’s ability to fully leverage the agreement.
He also highlighted the limited adoption of renminbi-denominated transactions by Nigerian businesses, attributing this to entrenched market habits, limited financial literacy, and inadequate sensitisation by financial institutions. These factors, he said, have slowed the broader uptake of the agreement.
Expert Insights and Stakeholder Contributions
In his remarks, Dr Joseph Tegbe, Director General of the Nigeria-China Strategic Partnership (NCSP), stressed that Nigeria could have reduced its dependence on the dollar by up to 35% had it maximized the opportunities provided by the swap deal earlier.
Represented by his Special Assistant on Strategic Trade Communication, Mr. Martins Olajide, Tegbe cited Brazil’s example, noting the country executed a $9 billion currency swap with China and recorded a $50 billion trade surplus in 2023. He said countries like Argentina, Egypt, South Africa, Sri Lanka, Turkey, and the UK have also benefited significantly from similar agreements.
Tegbe urged Nigerian stakeholders to boost non-oil exports to China and increase awareness of the benefits of yuan-denominated transactions. He emphasized the importance of collaboration among government agencies, financial institutions, and the private sector for effective implementation of the agreement.
He also quoted President Bola Tinubu’s remarks during a meeting with Chinese officials:
“We are not here to do what is comfortable, we are here to do what is right for our people and our country. We dare not miss the chance, because we are not sure of another”, he said.
Panel Discussion and Closing Remarks
The event featured a panel session titled “Navigating the People’s Republic of China Currency Swap Deal: Opportunities and Challenges for Importers, Exporters, and Maritime Businesses.”
Key participants included maritime lawyer Barr. Emeka Akabogu, former NIWA boss Mrs. O. Ezenwa, Dr. Mubarak Mahmoud from the Importers Association of Nigeria (IMAN), and other industry experts.
The President of MARAN, Mr. Godfrey Bivbere, expressed satisfaction with the engagement and turnout, while the Chairman of the occasion, Comrade Hakeem Olarenwaju, praised the awareness created and called on stakeholders to seize the opportunities presented by the agreement.
RN
