The deal renewal will allow Nigerian banks to access yuan through the Central Bank of Nigeria (CBN), enabling businesses to open Letters of Credit in yuan for Chinese imports. As China’s global trade influence continues to expand, the yuan has become increasingly recognized as a reserve currency. In 2016, the International Monetary Fund (IMF) included the yuan in its Special Drawing Rights basket, alongside the US dollar, euro, yen, and pound sterling. For Nigeria, the deal could help reduce the demand for dollars, which has contributed to exchange rate volatility and inflation. Conducting more trade in yuan, businesses can avoid the added costs of converting naira to dollars and then to yuan.
