China-Nigeria Currency Swap Agreement: A Constructive Interogation

This Paper is a constructive interrogation of China-Nigeria currency swap agreement. The deal is meant to bypass the US dollar as a currency of settlement in transactions between the two countries. It is expected to make enough local currency liquidity available to Nigeria and Chinese businessmen doing business in each other’s territory. The currency swap is aimed at stabilizing Nigeria Foreign Exchange Market and conserves her foreign exchange reserves. The theory of Balance of Trade was used as the intellectual framework of analysis. Also, Secondary method of data collection was used and the data collected was contently analyzed. The study finds the deal have significantly reduced the pressure of dollar on naira and have made Nigeria foreign trade and investment relations with China less vulnerable to unstable international financial system. The paper argues that with Chinese RMB as currency of settlement in the Nigeria-China trade relations; it will strengthen Nigeria foreign reserve, and stimulate financial discipline. The Paper maintains that the deal has eliminated the difficulties associated with dollar as a medium of settlement in international transactions. The study recommendations among others; Nigeria to restructure and align its economy to the path of production; Nigeria to create an enabling environment for Foreign Direct Investment, Nigeria to regulate the activities of foreign firms, the Central Bank of Nigeria should develop mechanism for oversight to prevent possible depreciation of the Naira against the Yuan, and Nigeria should focus on the local production of goods and services it has comparative advantage over China.