Nigeria is poised to sign a landmark agreement with China to enable direct conversion of the naira to the Chinese yuan through the Digital Renminbi (RMB).
This initiative is part of a broader strategy to reduce Nigeria’s reliance on the U.S. dollar and to strengthen economic ties with China. Joseph Tegbe, Director-General of the Nigeria-China Strategic Partnership (NCSP), announced the forthcoming deal during a recent Digital Asset Markets Strategy Masterclass in Lagos. He emphasized that the agreement marks a significant step toward transforming Nigeria’s trade relationship with China into a mutually beneficial development partnership.
The Digital RMB, issued by the People’s Bank of China, is a central bank digital currency (CBDC) that facilitates seamless financial transactions. The proposed agreement would allow for direct naira-to-yuan conversions, bypassing the need for U.S. dollars in bilateral trade. This move is expected to streamline transactions, reduce costs, and enhance the efficiency of trade between the two nations.
Over the past five months, Nigeria has attracted over $30 billion in investment commitments from Chinese companies, signaling robust confidence in Nigeria’s economic potential. The NCSP aims to leverage Chinese technology, particularly in digital asset markets, to drive knowledge transfer and support the globalization of Nigeria’s capital market. The broader objectives of the partnership include accelerating infrastructure development, scaling Chinese investments, enhancing trade, promoting transparency, and fostering cultural exchange between the two nations.
However, some experts have raised concerns about the potential implications of this deal. The Sea Empowerment Research Centre warned that the currency swap agreement might undermine Nigeria’s active participation in the African Continental Free Trade Area (AfCFTA) by increasing dependence on the Chinese yuan and potentially limiting trade with other African countries.
This development follows the recent renewal of a $2 billion currency swap agreement between Nigeria and China, aimed at enhancing trade and investment by allowing direct exchange of the Chinese yuan and Nigerian naira. The agreement, valid for three years, is designed to streamline trade transactions by eliminating the need for U.S. dollars as an intermediary currency.
As Nigeria continues to explore innovative financial solutions, the forthcoming digital currency deal with China represents a significant step toward diversifying its economic partnerships and reducing reliance on traditional financial systems.
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