Despite the introduction of the naira-yuan swap arrangement, the Centre for the Promotion of Private Enterprise (CPPE) has said the deal has made little to no significant impact on Nigeria-China trade, with the U.S. dollar remaining the dominant currency in transactions between the two countries.
The Chief Executive Officer of CPPE, Dr. Muda Yusuf, made this known while reacting to recent data from the National Bureau of Statistics (NBS), which showed that China retained its position as Nigeria’s largest import trading partner in the first quarter of 2024, with imports valued at N15.43 trillion, accounting for 48.82 percent of Nigeria’s total imports.
Dr. Yusuf noted that despite the sustained trade relationship between both countries, the naira-yuan swap arrangement has struggled to deliver meaningful change in the way international trade is conducted, as the dollar still dominates.
“The deal covers maybe even less than 15% of the total trade. If you look at the China swap deal, I think it’s about $5 billion over three years. When you compare that to the total trade volume, it doesn’t cover up to 20%,” he said.
According to him, Nigeria’s annual trade volume with China is estimated to be around $20 billion, indicating that the size of the swap arrangement is marginal compared to the scale of bilateral trade between both countries.
“The total amount under the swap deal does not substantially lower the volume or the value of trade between Nigeria and China,” he stressed.
Yusuf emphasized that trade decisions are primarily driven by businesses, not by governments, and most traders still prefer settling transactions in dollars.
“Trade is between business people. If you have a customer in China and they insist on payment in dollars, you can’t force them to accept yuan. Unless there are very robust incentives tied to using the yuan, Chinese exporters will continue to prefer dollars,” he explained.
He added that the swap arrangement is only meaningful if the exchange rate is attractive and competitive for exporters. “At the end of the day, you still have to convert your naira to yuan, and you must do so at a rate that makes sense to the exporter. If the exporter believes they benefit more from dollar payments, they will insist on being paid in dollars,” he said.
The CPPE boss argued that in a deregulated forex market like Nigeria’s, exchange rates are market-driven and cannot simply be adjusted to favor a swap arrangement.
He dismissed the swap deal as a “celebrated but limited” initiative, saying, “It’s not so much of a big game changer as we thought when it was introduced.”
Yusuf emphasized that rather than focusing on swap deals, Nigeria should prioritize strengthening its currency by boosting exports and managing its macroeconomic fundamentals. “What is most important is to grow our export capacity to strengthen our currency, whether against the yuan, the dollar, or the euro. The solution is to increase our foreign exchange earnings, especially from non-oil exports,” he said.
Dr. Yusuf pointed out that China has provided duty-free market access for imports from many African countries, including Nigeria, but lamented that Nigeria is yet to take full advantage of this opportunity.
“China has opened its doors to African countries, including Nigeria, free of duty. The issue is: what do we have to export to China in significant quantity? That’s the real challenge,” he stated.
He concluded that although the naira-yuan swap deal, which has been in place for about seven years, is still operational, its impact remains minimal. “If you ask me, the swap deal is not really a big deal in the larger scheme of things,” he said.
The naira-yuan swap agreement, introduced in 2018 between the Central Bank of Nigeria (CBN) and the People’s Bank of China, was intended to facilitate trade between the two countries, reduce demand for dollars, and ease pressure on Nigeria’s foreign reserves. However, the dollar continues to dominate Nigeria-China trade, raising doubts about the practical relevance of the swap deal in achieving its intended objectives.
