Chinese Traders Begin Accepting Naira in Forex Dealings, Easing Pressure on Dollar Demand

Nigeria’s foreign exchange market is witnessing a quiet but significant shift, as Chinese traders operating in the country increasingly accept the naira instead of the U.S. dollar for transactions.

The move, according to market operators, is helping to ease demand for the dollar and creating more liquidity in the system.

Aminu Gwadabe, President of the Association of Bureau de Change Operators of Nigeria (ABCON), confirmed that some Chinese business partners now engage in direct naira–yuan transactions, often through peer-to-peer arrangements. He explained that this practice bypasses the traditional route of converting naira to dollars before sourcing yuan, a process that has long fueled demand for scarce U.S. currency.

The development comes against the backdrop of Nigeria’s currency swap agreement with China, valued at about $2 billion (¥15 billion yuan), which was renewed in December 2024.

The swap is designed to facilitate trade settlement between both countries and reduce heavy reliance on the dollar. By allowing direct conversion of naira to yuan, the arrangement cuts transaction costs and settlement delays, saving traders money and time.

Forex analysts note that informal networks remain a large part of this trend. Many importers use unofficial naira–yuan transfers, likened to hawala systems, to settle payments with suppliers in China. These networks thrive because of the difficulties businesses face in accessing foreign currency through Nigeria’s formal banking channels.

Despite the progress, the dollar remains dominant in Nigeria’s wider forex market. Many importers still prefer to transact in U.S. currency because of its universal acceptance and liquidity. Traders caution that while Chinese acceptance of the naira brings some relief, it does not fully replace dollar transactions, especially for international remittances, education, and medical payments abroad.

Economists, however, see the gradual adoption of the naira in Chinese trade dealings as a step towards diversifying Nigeria’s forex base. By easing the country’s dependence on the dollar, the shift could help stabilize the naira in the long term and give businesses more flexibility in cross-border trade.