The naira has maintained relative stability in recent weeks, driven by Nigeria’s currency swap agreement with China and the rise of peer-to-peer (P2P) foreign exchange platforms, according to forex traders. The agreement, enabling Chinese traders to accept naira for yuan, has reduced reliance on the U.S. dollar, easing pressure on Nigeria’s currency amid persistent dollar shortages.
Aminu Gwadebe, President of the Association of Bureau De Change Operators of Nigeria (ABCON), highlighted the impact of the swap deal and P2P trading in an interview with Nairametrics. “Chinese businesses, particularly in mining, are now accepting naira for yuan through P2P channels, boosting market liquidity,” he said. Initially signed in April 2018 and renewed in December 2024 for $2 billion, the swap allows the Central Bank of Nigeria (CBN) and the People’s Bank of China to facilitate trade in local currencies, supporting Nigeria’s $14.14 trillion in imports and $3 trillion in exports to China in 2024. Gwadebe noted that Nigerian importers can settle transactions directly in yuan, avoiding costly dollar conversions. “Why convert naira to dollars, then yuan? It’s inefficient,” he said, citing vibrant naira-yuan markets in China.
However, currency trader Yusuf cautioned that the swap’s impact on daily market operations is limited. “While the deal helps businesses trading with China, most Nigerian traders prefer dollars due to their global acceptance,” he explained. Yuan liquidity remains low in street markets, with minimal influence on transactions like remittances or school fees, where dollars, pounds, and euros dominate. “You can’t easily buy yuan at a Bureau De Change,” Yusuf added.
The CBN’s interventions, rising non-oil exports, and reduced speculation have further supported the naira’s stability. The swap deal, designed to enhance bilateral trade and economic cooperation, cuts dollar demand for the 20% of Nigeria’s imports from China. Yet, its broader effectiveness is constrained by the dollar’s global dominance. As Nigeria seeks to strengthen its foreign reserves and financial markets, the combination of the swap agreement and P2P platforms signals a shift toward diversified currency solutions, though challenges remain in fully curbing dollar dependency.
