Nigeria Pushes Yuan and BRICS Currencies to Ease Dollar Pressure

Africa · Western

Key Facts

—Currency Swap. Nigeria renewed a CNY 15 billion (US$2 billion) bilateral swap line with China in December 2024 to settle trade directly in naira and yuan.

—BRICS Partnership. Nigeria formally accepted an invitation to join BRICS as a partner country in January 2025, gaining access to the New Development Bank's local-currency lending.

—Dollar Strain. Chronic U.S. dollar shortages, rooted in oil-price volatility and a trade deficit with China, drive the policy shift toward alternative trade-settlement currencies.

—Cost Savings. Direct naira-yuan settlement can save importers 100–300 basis points in foreign-exchange spreads and cut cross-border payment clearance from days to hours.

—Global Context. The dollar still dominates 90% of international trade and 75% of FX transactions, making Nigeria's move a pragmatic hedge rather than a wholesale de-dollarisation.

Nigeria is methodically pushing yuan and BRICS currencies into its trade-finance architecture to relieve chronic dollar shortages, lower import costs, and hedge against an increasingly fractured global monetary order.

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The Yuan Swap That Changed the Calculation

The Central Bank of Nigeria first signed a bilateral currency swap with the People’s Bank of China on 27 April 2018 in Beijing, unlocking up to CNY 15–16 billion against NGN 720 billion—roughly US$2.4–2.5 billion at the time. The facility was designed with a single operational purpose: to allow Nigerian importers to open renminbi-denominated letters of credit and pay Chinese suppliers directly, without first sourcing scarce U.S. dollars.

After years of sluggish uptake, the agreement was renewed in December 2024 at approximately CNY 15 billion (US$2 billion), and CBN Governor Olayemi Cardoso signalled a fresh operational push. Speaking through his adviser Anthony Ogufere at a Lagos maritime event, Cardoso framed the swap as a practical tool to cut shipping costs, speed up settlement, and ease foreign-exchange pressures in sectors that live or die on trade finance.

Why Nigeria Needs an Escape Hatch from the Dollar

Nigeria’s dollar problem is structural and punishing. The economy depends overwhelmingly on crude-oil exports for hard-currency earnings, yet runs a persistent trade deficit with China, its largest single supplier of manufactured goods.

When oil prices collapsed after 2015, dollar reserves drained away and the naira plummeted, exposing every importer to brutal exchange-rate volatility. The yuan swap was conceived in that crisis as a lifeline—a way to keep goods flowing from China without burning through scarce greenbacks.

BRICS Partnership Opens a Wider Door

At the 16th BRICS summit in Kazan, Russia, Nigeria was invited to join the bloc as a partner country, and Abuja formally accepted in January 2025. The status gives Nigerian policymakers a seat at the table where alternative financial infrastructure is being built—most tangibly, the Shanghai-based New Development Bank.

The NDB raises funds and lends in member countries’ local currencies, meaning borrowers do not need to earn dollars or euros to service debt. For a country repeatedly buffeted by dollar cycles, access to renminbi- and rand-denominated project finance represents a genuine diversification of sovereign and corporate funding channels.

The Great-Power Contest Over Trade Settlement

Nigeria’s pivot fits squarely into the broader contest documented in our pillar series Africa: The New Scramble, where currency arrangements have become instruments of geopolitical alignment. China’s central bank has systematically built a network of yuan swap lines across Africa, using them to expand renminbi influence while offering partner states a partial shield against dollar shortages and Western sanctions regimes.

The Institute for Economics and Peace characterises this moment as the “weaponisation of economic interdependence,” in which middle powers deploy tools such as swaps, BRICS Pay experiments, and local-currency lending to reshape global power dynamics without firing a shot. Nigeria, by accepting both the yuan swap and the BRICS partnership, is positioning itself as a beneficiary of that shift.

What the Shift Means for Business and the Naira

For Nigerian importers of electronics, machinery, and consumer goods, the operational maths is straightforward. Converting naira directly to yuan eliminates one leg of the traditional naira-dollar-yuan chain, potentially saving 100–300 basis points in FX spreads and cutting payment clearance from days to hours.

Maritime and logistics firms stand to gain from lower shipping-related FX costs, while the CBN can conserve dollar reserves for other external obligations. Yet the relief is targeted, not universal—corporates trading with American, European, or most Asian partners will still need robust dollar risk management.

The Limits of De-Dollarisation

For all the political rhetoric, the global monetary hierarchy remains stubbornly intact. Close to 90 percent of international trade transactions are still conducted in U.S. dollars, and the greenback accounts for roughly 75 percent of global foreign-exchange turnover, compared with just 3–5 percent for the renminbi.

Analysts at the Carnegie Endowment and elsewhere caution that BRICS internal divergences—India’s wariness of China, Brazil and South Africa’s deep Western ties—make a coherent common currency or alternative reserve system unlikely in the near term. Nigeria will therefore continue to need the dollar for oil pricing, sovereign borrowing, and the bulk of its external trade.

What to Watch Next

The real test of Nigeria’s strategy will be utilisation rates on the renewed swap line and the volume of NDB-funded projects that materialise on Nigerian soil. If renminbi-denominated letters of credit become a routine instrument rather than a policy announcement, the CBN will have built a durable, if modest, buffer against future dollar squeezes.

For Latin American readers watching from Brasília, Buenos Aires, or São Paulo, Nigeria’s incremental approach offers a live case study in how a large emerging economy navigates the space between Western financial circuits and the expanding BRICS toolkit—without burning either bridge.

Frequently Asked Questions

How does Nigeria’s yuan swap actually work for importers?

The Central Bank of Nigeria makes renminbi liquidity available to Nigerian commercial banks, which can then issue renminbi-denominated letters of credit to businesses importing from China. The importer pays in naira, the Chinese supplier receives yuan, and the intermediate conversion via U.S. dollars is eliminated entirely.

Does Nigeria’s BRICS partnership mean it is abandoning the dollar?

No. The dollar still dominates roughly 90 percent of international trade and 75 percent of global FX transactions, and Nigeria maintains deep economic ties with Western economies. The strategy is a pragmatic hedge—incrementally using yuan and other BRICS currencies in specific trade-finance niches while keeping full access to dollar-denominated markets and institutions.

What concrete benefits can Nigerian businesses expect?

Importers sourcing from China can save 100–300 basis points in foreign-exchange spreads by converting naira directly to yuan, and cross-border payment clearance can shrink from days to hours. Over time, access to New Development Bank local-currency loans could lower currency-mismatch risk on infrastructure and long-tenor projects.