Forex traders have credited the recent stability in Nigeria’s exchange rate to the country’s renewed currency swap agreement with China and the growing use of peer-to-peer (P2P) foreign currency trading.

Under the swap arrangement, Chinese traders now accept naira in exchange for the yuan, reducing pressure on the U.S. dollar. The deal, first signed in April 2018 and renewed in December 2024 for $2 billion, allows the Central Bank of Nigeria (CBN) and the People’s Bank of China (PBoC) to provide liquidity in their local currencies to promote bilateral trade and investment.

According to Aminu Gwadebe, President of the Association of Bureau De Change Operators of Nigeria (ABCON), the swap deal is easing dollar demand for imports from China.

“The Chinese are now collecting naira for yuan. If a Nigerian is importing from China, all he needs is yuan to settle his affairs. There’s no need to go through dollars,” Gwadebe told Nairametrics.

He added that P2P currency exchanges—where individuals trade directly with one another through online platforms—are also providing liquidity and helping to stabilize the naira.

However, some traders argue that the impact of the swap agreement remains limited in daily forex operations. Yusuf, a currency dealer, noted that while the deal was designed to reduce dollar dependence, many Nigerian importers and even Chinese suppliers still prefer transactions in U.S. dollars.

“The swap is helpful for trade between Nigeria and China, but on the ground, its impact on the black market is very small. The dollar is still the preferred currency globally,” Yusuf said.

He also stressed that yuan remains less liquid in Nigeria compared to the dollar, pound, or euro, limiting its use for expenses like school fees, medical bills, or remittances abroad.

Why it matters:

  • Nigeria imports significantly more from China than it exports, with N14.14 trillion worth of goods imported in 2024 compared to just over N3 trillion in exports.

  • The swap deal helps reduce reliance on the dollar for these transactions, potentially boosting foreign reserves.

  • P2P forex platforms provide convenience and cost savings but operate outside traditional banking systems.

While the swap deal and P2P exchanges are offering some relief, analysts say the U.S. dollar remains dominant in Nigeria’s forex market, meaning true long-term stability will depend on broader economic reforms and stronger export performance.