The governor of the Central Bank of Nigeria (CBN) has been explaining how letters of credit (L/Cs) should become easier to obtain following a landmark agreement by China and Nigeria of a new loan and currency swap deal.

On a recent visit to China, Nigerian president Muhammadu Buhari negotiated the US$6 billion deal with Beijing, as he continues to search for ways to revive an economy burdened by dwindling oil revenues.

Bank agreements

The Industrial and Commercial Bank of China (ICBC) and the CBN signed the deal, which enables Nigerian firms to enter into yuan transactions.

CBN governor, Godwin Emefiele, explained that the swap was agreed after discussions with the People's Bank of China, and that the deal with ICBC was the biggest of its kind in the world.

Benefits

"The benefits are twofold," he said. "It affords Nigerian importers the opportunity to open L/Cs using renminbi as a currency rather than using the [US] dollar," the governor added.

The other benefit in the arrangement is that the ability to deal in renminbi puts less pressure on Nigerian traders who have so far required US dollars to trade with China.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.