Chinese Traders Embrace Naira Amid Renewed Nigeria-China Currency Swap; P2P Forex Trade Bolsters Naira Stability

In a significant shift within Nigeria’s forex market, Chinese traders are increasingly opting to collect Nigerian naira instead of US dollars for their transactions, contributing to a newfound stability in the naira’s exchange rate. Forex traders and market experts attribute this development partly to Nigeria and China’s renewed currency swap agreement and the rising use of peer-to-peer (P2P) foreign currency trading platforms.

The renewed currency swap accord, extended in December 2024 to a $2 billion facility (about 15 billion yuan), facilitates trade between the two nations using their local currencies—naira and yuan—rather than converting through the dollar. This arrangement reduces reliance on the US dollar, controlling exchange costs and easing liquidity pressures on Nigeria’s foreign reserves. It has become particularly pivotal for businesses involved in trade with China, especially given China’s status as Nigeria’s largest trading partner, accounting for roughly 35% of total Nigerian imports.

Aminu Gwadebe, President of the Association of Bureau De Change Operators of Nigeria (ABCON), described the impact of these developments in an exclusive discussion with Nairametrics. He noted that Chinese traders are doing P2P exchanges, collecting naira for yuan directly. Gwadebe highlighted the presence of numerous Chinese-operated factories in Nigeria, where such currency exchange practices prevail, easing the pressure on the naira. He remarked, “The Chinese are now collecting naira for yuan, doing P2P. You go to any mining factory, and you’ll see a Chinese man in Nigeria. These two factors—the Chinese currency swap and P2P trades—are working on the market stability in ways the Central Bank is not doing” .

P2P foreign currency platforms allow individuals and businesses to exchange currency without intermediaries like banks or traditional forex services. This cutting of middlemen reduces transaction costs and enhances liquidity in foreign exchange markets, easing pressure on the naira’s value.

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The currency swap deal initially signed in April 2018 faced some challenges but was renewed at the end of 2024. Beyond facilitating bilateral trade and reducing transaction costs, the swap has broader monetary policy implications, enabling Nigeria’s Central Bank to better manage foreign reserves and support the naira. The Central Bank of Nigeria (CBN) recognizes the swap as a strategic measure to lower shipping costs, improve trade efficiency, and ease foreign exchange pressures .

Despite the positive impacts, experts caution that while the swap deal and P2P trading improve liquidity and trade settlement between Nigeria and China, the US dollar remains dominant in many global trade contexts. For daily and smaller transactions, the dollar remains preferred by some suppliers and traders, limiting the immediate effect of these arrangements on the wider forex market .

In addition to the swap and P2P trading influence, broader economic reforms under the current administration, including the CBN’s interventions, forex market liberalization, and increased foreign portfolio investments, are contributing to the stabilized foreign exchange environment. This has seen the naira trade steadily at around ₦1,530 to the dollar level in recent weeks, a significant improvement compared to earlier volatility .

The growing acceptance of the naira by Chinese traders and the proliferation of peer-to-peer forex trades signal tangible progress toward reduced dollar dependency in Nigeria’s foreign exchange landscape. However, this is a gradual process, with full de-dollarization in cross-border trade expected to evolve over time as market confidence and institutional frameworks strengthen .

In conclusion, the renewed Nigeria-China currency swap agreement and the expansion of P2P forex trading are key drivers easing demand pressures on the naira and enhancing its stability. These developments, alongside robust foreign exchange reforms and investments, underpin a more resilient and integrated forex market in Nigeria today.

This narrative marks a promising step in Nigeria’s ongoing efforts to stabilize its currency and improve trade efficiency with its largest trading partner. The coming months will be crucial as stakeholders continue to monitor these dynamics and their long-term effects on the naira’s strength in both official and parallel markets.