Naira’s Dance of Gains and Losses with China
By Khadijah Lawan Muhammad,
When I first heard that more Chinese traders in Nigeria are beginning to accept the naira rather than insisting on the U.S. dollar, I felt a surge of cautious optimism.
It seemed at last that Nigeria was making strides toward reclaiming a measure of financial sovereignty. But while this shift is heartening, it should not be mistaken for a sustained breakthrough in our foreign exchange crisis.
The renewed ₦3.28 trillion (15 billion yuan) currency swap agreement between the Central Bank of Nigeria and the People’s Bank of China, signed in December 2024, is a monumental step.
It allows trade settlement directly in naira and yuan, bypassing the dollar, cutting transaction costs, and easing liquidity constraints for businesses engaging with Chinese partners.
As someone who follows foreign exchange trends closely, I see this as a stabilising force for the naira. The benefits stretch beyond forex relief. The swap promises smoother shipping, faster port clearance—particularly at the Chinese-backed Lekki Deep Sea Port—and cheaper trade for sectors like manufacturing and agriculture.
Yet the challenge remains that awareness of this mechanism is still painfully low. Many Nigerian traders continue to pay in dollars, either because they are unaware of the alternative or because banks are not adequately equipped to facilitate naira–yuan transactions.
This underutilisation is a serious missed opportunity. According to the Abuja Chamber of Commerce and Industry, less than 10 percent of Nigeria–China trade is conducted through the swap.
The Centre for the Promotion of Private Enterprise (CPPE) estimates the figure at under 15 percent. These numbers highlight the urgent need for targeted education campaigns, digital integration, and policy incentives that will drive wider adoption of the swap mechanism.
But even if awareness grows, the swap alone cannot fix everything. Nigeria’s trade relationship with China is marked by imbalance. We import far more than we export, creating a one-way flow of foreign exchange that limits the availability of yuan liquidity.
This imbalance reduces the power of the swap to genuinely protect our reserves or stabilise our currency. There are also regional concerns. Some experts, including the Sea Empowerment Research Centre, warn that reliance on bilateral deals like this could undermine Nigeria’s role in the African Continental Free Trade Area (AfCFTA), which seeks to strengthen intra-African trade and currency use.
Strengthening ties with China is important, but we must be careful not to sacrifice broader continental goals for short-term convenience. Others have coined the phrase “swapization” to caution against leaning on deals that offer quick relief without tackling deeper problems such as industrial decline, import dependence, and weak domestic production.
To avoid this trap, Nigeria must pair the swap with aggressive industrialisation, strong support for value-added exports, and strategic investment in local capacity.
Still, I believe the growing acceptance of the naira in Chinese trade is progress worth celebrating. For small and medium enterprises importing machinery, raw materials, or spare parts, access to yuan through Nigerian banks could ease many forex burdens—if only the systems are made practical, visible, and reliable.
This is why I urge bold action from government and regulators: digitise the swap platforms completely, train traders on how to use direct settlement methods, and push banks to make naira–yuan transactions a real priority.
At the same time, Nigeria must invest heavily in export diversification—supporting agro-processors, value-chain industries, and even the creative economy—to build goods and services we can sell abroad in exchange for yuan, or perhaps even for naira.
The increasing acceptance of naira by Chinese traders is encouraging, but 2025 must not be the year of half-steps. It should be the year Nigeria moves from tentative experiments to decisive reforms in trade architecture.
With serious public education, industrial mobilisation, and disciplined policy, this swap could evolve into a cornerstone of our economic transformation. The real success will not come from the mere existence of the deal, but from the moment the average trader, manufacturer, and exporter begins to feel its benefits.
Until then, cautious optimism must remain matched with relentless pressure for reform.
Khadijah Lawan Muhammad is a Mass Communication student at Nile University and an intern with PRNigeria. She can be reached via: [email protected]