The currency swap deal between China and Nigeria is expected to boost letter of credit (L/C) transactions between the two countries according to a Nigerian business leader.

President of the Abuja Chamber of Commerce and Industry (ACCI), Adetokunbo Kayode, says the prospects are bright for traders in both countries and the yuan-naira swap deal will have several beneficial effects.

L/C advantages

Top of Kayode's list of potential advantages in the deal is that it will ease payment issues with traders that want to transact using either the Chinese renminbi or Nigerian naira.

Another advantage of the deal is that it widens the choice of L/Cs for traders says Kayode, who is also a corporate lawyer, tax expert and international arbitrator.

"Now our banks can open L/Cs in yuan instead of only the dollar, euro or pound," he says.

Trade boost

The volume of trade between China and Nigeria reached US$5.8 billion in May 2018, a 7.3 per cent increase over the same month in the previous year.

According to Kayode this reflects the new impetus for the two countries to trade as a result of the currency swap deal.

On 4 May 2018, Nigeria became the third African country after South Africa and Egypt to sign a currency swap deal with China.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.