Naira-Yuan Swap Boosts Naira Stability, Promises Cheaper Imports from China

Nigeria’s currency, the naira, is gaining renewed strength as experts highlight the benefits of the Naira-Yuan currency swap between Nigeria and China. The arrangement, which allows both countries to trade directly in their local currencies, is helping reduce pressure on the dollar and is expected to make Chinese imports more affordable for Nigerian consumers. Traders and analysts note that the move is beginning to stabilize the exchange rate, offering relief to businesses dependent on imports.

Development economist Professor Tayo Bello of Adeleke University described the swap as a welcome boost for the Nigerian economy. According to him, the policy signals growing demand for the naira, which could help ease imported inflation. He stressed that since China is Nigeria’s largest trading partner, cheaper imports would benefit consumers and businesses alike. However, he cautioned that Nigeria must also expand its exports to China, warning that without sufficient goods and services to trade, the long-term impact of the agreement could be limited.

Echoing this, Dr. Chukwunenye Kocha, a financial economist at Rivers State University, said a stable naira would encourage more foreign direct investment (FDI), which has long lagged behind portfolio investments due to currency volatility. While he noted that the swap was useful for bilateral trade, he emphasized its limitations, as neither the naira nor the yuan is globally tradable. This means its influence is still largely confined to Nigeria-China relations.

Meanwhile, experts like Ayokunle Olubunmi of Agusto & Co believe the rising acceptance of the naira by Chinese businesses goes beyond the swap deal. He attributed it instead to the influx of Chinese firms in Nigeria, particularly in fintech and e-commerce. With companies like Opay, Palmpay, and more recently Temu expanding their presence, many transactions are now conducted directly in naira. This trend, backed by Chinese capital and aggressive pricing strategies, is also fueling financial inclusion across the country.

Olubunmi argued that these companies, rather than central bank policy, are the real drivers behind the naira’s growing relevance in Nigeria-China trade. As he explained, many Chinese-owned businesses already hold significant naira reserves from their operations in the country, making it natural to transact in the local currency. Analysts believe this deeper integration of Chinese firms into Nigeria’s economy could help further stabilize the naira, while making imports more affordable and reducing the country’s dependence on the U.S. dollar.

Source: Leadership