The Governor of the Central Bank of Nigeria, Olayemi Cardoso, has announced that Nigeria is developing a new framework to promote the use of national currencies in bilateral trade settlements. Speaking at a press briefing during the IMF and World Bank Annual Meetings in Washington DC, Cardoso explained that although the country had previously experimented with local currency trade agreements, the initiative did not produce the desired outcomes.
“We have had an experiment with that (switching to national currencies in bilateral trade). And to be frank, it did not work out very well for us,” he said. “That is not to say that we are not interested in doing this. We are. And we are really at an elementary stage of putting up a framework, now that our currency is more competitive, to be able to ensure that it is a win-win for everybody.”
Cardoso stated that the Central Bank was adopting a more cautious and structured approach this time to guarantee that future local currency trade arrangements deliver mutual benefits and reduce dependence on foreign exchange in cross-border transactions.
Bilateral currency trade arrangements, also known as local currency settlement agreements, allow two countries to trade directly using their national currencies instead of the U.S. dollar or other reserve currencies. Nigeria has tried this approach before, most notably with China through the 2018 currency swap agreement signed between the Central Bank of Nigeria and the People’s Bank of China.
The deal, valued at about N720 billion or RMB 15 billion, was designed to ease pressure on Nigeria’s dollar reserves, promote trade with China, and make it easier for Nigerian importers to access yuan for Chinese goods. However, the arrangement faced challenges such as limited awareness among traders, logistical difficulties, exchange rate uncertainty, and the absence of a robust settlement framework. Many Nigerian businesses continued to depend on the U.S. dollar for imports, while local banks struggled to maintain sufficient yuan liquidity.
CBN officials later admitted that the pilot phase “did not work as efficiently as expected,” though it offered important lessons for designing more effective frameworks in the future. Despite these challenges, a new bilateral currency swap agreement was reached in December 2024 between Nigeria and China.
The renewed deal, jointly announced by the CBN and the People’s Bank of China, is worth N3.28 trillion, equivalent to approximately 15 billion yuan or $2.09 billion. Valid for three years and renewable upon mutual agreement, the swap aims to strengthen financial cooperation, simplify naira and yuan transactions, and reduce Nigeria’s reliance on the U.S. dollar in trade.
Cardoso’s comments indicate that the Central Bank is revisiting the idea of using national currencies for bilateral trade, especially now that the naira has become more competitive following recent foreign exchange reforms. He also said that Nigeria’s foreign exchange reforms and macroeconomic adjustments have strengthened the country’s external position, leading to a positive balance of trade for the first time in years.
“From Nigeria’s perspective, it is less of a problem for us because a lot of the things that needed to have been done, we did much earlier,” he explained. “We now have a more competitive currency, and as a result, for once, we have a situation where we have a positive balance of trade, a trade surplus expected to be around six per cent of GDP and to remain at that for some time.”
He said this development reflected a “complete restructuring” of the economy that had improved resilience and created buffers against external shocks, particularly in the oil sector, Nigeria’s major export earner. Cardoso added that ongoing economic reforms had boosted investor confidence and improved the country’s trade position, noting that a flexible exchange rate was already encouraging local production and discouraging excessive imports.
Cardoso, who also serves as First Vice-Chair of the G24, highlighted that developing and emerging economies were now better represented in global financial discussions, especially under the Bretton Woods institutions such as the International Monetary Fund and the World Bank.
“It has been very useful, and it is clear to me that under the leadership of Argentina, being the Chair of the G24, we have certainly advanced the cause with the voice of the emerging economies,” he said. “We have been able to get a more effective seat at the table, especially with respect to the Bretton Woods Institutions and getting our voices heard. That, in itself, is a major step forward. We expect that the very good work that has been done will be further deepened in the years ahead.”
The G24, formally known as the Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development, unites developing countries to coordinate their positions on international financial and development matters. Cardoso described the platform as “a useful space for mutual learning” between global financial institutions and developing nations.
“We had a dialogue with both the Managing Director of the IMF and the representative of the World Bank President,” he said. “There was an exchange of ideas that helps the Bretton Woods leadership to better understand directly from the players what the issues are and where the pain points really are.”
He also noted that the G24 communiqués now capture critical issues affecting member states, such as domestic resource mobilisation, inflation, debt, and growth challenges. “They learn from us, and we also learn from them,” Cardoso added.
The CBN governor emphasised that consistent and sound macroeconomic policies were essential for achieving disinflation, sustainable growth, and resilience among emerging economies. “One of the issues that can help to get many of our countries out of the difficult situation are macroeconomic policies, and sound macroeconomic policies at that,” he said. “There is a clear correlation between those who have adopted such policies and the progress they are recording in growth and disinflation.”
Cardoso further noted that Nigeria’s economic progress was the result of early and decisive policy measures that helped shield the economy from deeper shocks and restored confidence in the local currency. He said the ongoing reforms had encouraged stability, reduced speculative activities in the foreign exchange market, and promoted greater use of the naira in international trade.
He reaffirmed that the CBN would continue implementing fiscal and monetary policies that support productivity, enhance foreign exchange stability, and promote trade diversification. According to him, the Central Bank’s new approach to bilateral currency settlement frameworks would help Nigeria benefit more from international trade while supporting local businesses.
The G24, established in 1971, continues to coordinate developing countries’ positions on global monetary and development finance issues, ensuring that their voices are included in key international decisions that affect their economies.