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The Central Bank of Nigeria has signed an agreement with the Industrial and Commercial Bank of China (ICBC) to allow renminbi transactions among Nigerian banks and the inclusion of the Chinese currency in Nigeria’s foreign exchange reserves.

The agreement was announced following Nigeria’s President Muhammadu Buhari’s meeting with the Chinese President, Xi Jinping, in Beijing on Tuesday.

"It means that the renminbi (yuan) is free to flow among different banks in Nigeria and the renminbi has been included in the foreign exchange reserves of Nigeria," Lin Songtian, Director General of China’s foreign ministry's African affairs department, told reporters.

Songtian also said the framework on naira-yuan currency swaps have been agreed with the CBN, making it easier to settle trade deals in yuan.

The move by the CBN to diversify Nigeria’s foreign exchange reserves into yuan started in 2011 under the former CBN Governor Sanusi Lamido Sanusi. Last weekend, Nigeria’s Finance Minister, Kemi Adeosun, said the federal government is considering issuing yuan-denominated (Panda) bonds to raise funds to plug the 2016 budget deficit.

The yuan has become more attractive option for countries seeking to diversify their foreign reserves away from the dollar. In November last year, the International Monetary Fund approved the addition of the yuan to its elite Special Drawing Rights basket of reserve currencies, which includes the U.S. dollar, the euro, the pound, and the yen.