Experts Warn of Sovereignty Risks in China-Nigeria Currency Swap Deal

The SEA Empowerment Research Center has voiced concerns about the potential risks of the $2 billion China-Nigeria currency swap deal, cautioning that the initiative could compromise Nigeria’s national resources and economic sovereignty if not carefully managed.

In its recently released end-of-year report, the Center acknowledged the benefits of the agreement, such as enhancing trade and investment between the two nations, which currently account for nearly 30% of Nigeria’s total foreign trade. The deal is also expected to reduce reliance on the U.S. dollar, promoting the use of the Chinese Yuan and Nigerian Naira in bilateral transactions.

The report highlighted advantages including improved cross-border trade efficiency, increased liquidity for businesses, and the potential for job creation. However, it also raised significant concerns about the risks involved.

The Center warned of a trade imbalance, as Nigeria imports far more from China than it exports, which could strain the country’s foreign exchange reserves. The growing dependence on Chinese funding was flagged as a potential debt trap, with risks to national sovereignty and the possibility of critical infrastructure falling under Chinese control, as has occurred in other African countries like Angola, Kenya, and Zambia.

The report also noted that the swap deal could conflict with Nigeria’s commitments to the African Continental Free Trade Area (AfCFTA), which aims to foster intra-African trade and reduce dependence on external currencies. Transparency issues surrounding the terms of the agreement were highlighted as another area of concern, potentially fostering corruption and undermining public accountability.

To mitigate these risks, the SEA Empowerment Research Center recommended several measures, including diversifying trade relationships, reducing reliance on Chinese funding, and promoting the use of African currencies in line with AfCFTA goals. The Center called for stronger regulatory frameworks, improved debt transparency, and the publication of all terms and conditions of the currency swap deal for public scrutiny and parliamentary oversight.

Lawmakers were urged to review the policy and enact protective legislative frameworks to ensure alignment with Nigeria’s national interests. The Center also emphasized the importance of a comprehensive debt management strategy to safeguard the country’s economic future.

It concluded by appealing to the Nigerian government to approach the currency swap deal with caution, prioritizing long-term sustainability and national sovereignty over short-term financial gains.