Central Bank of Nigeria (CBN) says it will relaunch a national currency trade settlement scheme after earlier attempts failed to deliver expected results.....KINDLY READ THE FULL STORY HERE▶

CBN Governor Olayemi Cardoso made the announcement during a media briefing at the International Monetary Fund and World Bank annual meetings in Washington, D.C. He said the initiative will allow Nigeria to conduct trade with other countries using national currencies instead of relying on the U.S. dollar.

“We have had an experiment with using national currencies in bilateral trade, and to be frank, it did not work out very well for us,” Cardoso said. “That is not to say we are not interested in doing this. We are. We are really at an early stage of putting up a framework to ensure it is a win-win for everybody.”

The central bank chief explained that the new framework will be more structured and carefully designed to prevent the problems that weakened previous efforts. He said lessons learned from the failed attempt would guide the relaunch.

A Second Attempt at Local Currency Trade

Nigeria first introduced a currency swap deal with China in 2018 to encourage trade in the naira and yuan instead of the U.S. dollar. The agreement, worth about ₦720 billion (RMB 15 billion), aimed to reduce pressure on Nigeria’s foreign reserves.

However, the plan faced several challenges. Many importers and exporters continued to prefer using dollars, and banks struggled with limited yuan liquidity. Exchange rate instability and low awareness among traders also affected participation.

Despite the setback, Nigeria and China renewed their currency swap agreement in 2024, valued at N3.28 trillion (RMB 15 billion) and valid for three years. The deal aims to strengthen trade ties and reduce dependence on the dollar amid ongoing economic reforms.

Reforms to Strengthen the Naira

Cardoso said Nigeria’s recent foreign exchange reforms have improved transparency and built a stronger foundation for local currency trade. The CBN introduced a new “B-matching” system that makes foreign exchange transactions more open and competitive.

The bank has also started publishing audited financial statements and net reserves to boost confidence in its operations. Cardoso said these changes have made the naira more competitive, making it a better time to revive the currency trade scheme.

Analysts say the move could help Nigeria stabilize its currency, reduce dollar demand, and promote closer trade relationships with countries willing to trade in their local currencies.

Potential Benefits and Challenges

If successful, the relaunch could lower transaction costs and make trade more affordable for Nigerian businesses. It may also protect the economy from global currency fluctuations and strengthen the country’s external sector.

However, economists warn that key challenges remain. The central bank will need to maintain exchange rate stability, ensure liquidity in partner currencies, and improve communication with traders and banks.

Financial analyst Abiodun Ayodele said the plan could work if Nigeria develops strong monitoring systems and clear guidelines. “Without discipline and transparency, it may end up like the last attempt,” he said.

Next Steps

Cardoso said the CBN will begin consultations with trade partners and financial institutions to design the new framework. Details of the scheme, including which countries may participate first, are expected to be released after the bank completes its internal review.

The relaunch forms part of Nigeria’s broader economic reform plan aimed at restoring investor confidence, stabilizing the foreign exchange market, and supporting local industries.

Observers say the success or failure of the new currency trade scheme could shape Nigeria’s foreign trade outlook and determine how well the country can manage its dependence on the U.S. dollar in the years ahead.