Introduction

The signing ceremony marked the culmination of two years of negotiation between the two countries, which commenced during the official state visit of the Nigerian President Muhammadu Buhari to the People’s Republic of China in April 2016.

Nigeria’s vulnerability to external shocks and issues with maintenance of its external reserves as a result of over dependence on oil, Nigeria largest foreign exchange (FX) earner is well researched and documented. Faced with a need to create an alternative to her over-dependence on the Petrodollar, the BCSA allows for direct currency exchange between traders and investors in Nigeria and China thereby utilizing the liquidity of the swap deal. The question then is, what is the BCSA about? How does it work? What are the potential implications and opportunities, if any, for individuals and corporate citizens?

A Bilateral Currency Swap Agreement involves a process where two countries make available to each other, its liquid currency to facilitate the election of either currency to denominate aspects of their mutual trade on a direct exchange backed by their respective national currencies, rather than a third-party intermediary currency.

Overview of the Bilateral Currency Swap Agreement

According to data made available by the National Bureau of Statistics, China is the 3rd largest trading partner with Nigeria after India and United States of America. The figures show that trade in goods between Nigeria and China was at a record high of circa N2.0tn in 2017, with total import from China valued at N1.8trn, while total Export from Nigeria was valued at N220bn giving a trade deficit of about NI.6trn.

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