CBN Commences Chinese Yuan Forex Intervention
The Central Bank of Nigeria (CBN) yesterday flagged off its intervention in the sale of foreign exchange in Chinese Yuan (CNY), signaling the consummation of the Bilateral Currency Swap Agreement (BCSA) signed with the People’s Bank of China (PBoC) on April 27.
The import of the Foreign Exchange currency diversification is aimed at checking the rising pressure on the United State currency- Dollar which high demand for all international transaction before now has had a negative impact on the county’s inflationary trend, leading to the devaluation of the Nigerian currency – the Naira.
Also, by adopting a second direct convertible currency, the additional cost of having to go through a third currency is now being erased and the CBN believes this would ultimately positively affect the bottom-line of imported goods and services from China. A statement issued by the Bank on Friday disclosed that the sales shall be through a combination of spot and short tenured forwards.
It added that the exercise, which shall be Special Secondary Market Intervention Sales (SMIS) retail, would be dedicated to the payment of Renminbi denominated Letters of Credit for raw materials, machinery and agriculture. The Bank’s spokesman, Isaac Okorafor, explained that the CBN would receive bids from all authorised dealers.
He added that due to the peculiarity of the exercise, the Bank would not be applying the relevant provisions of its Revised Guidelines for the Operation of the Inter-bank Foreign Exchange Market, which direct all SMIS bids to be submitted to the CBN through the Forex Primary Dealers (FXPDs).
According to Okorafor, the CBN would also not be applying the relevant provisions of the Guidelines which equally provide that “Spot FX sold to any particular end-user shall not exceed 1% of the overall available funds on offer at each SMIS session”. Speaking on the bid period, he said authorised dealers were requested to submit their customers’ bids from 9.00 am to 12.00 pm on Friday July 20, 2018, adding that bids received after this time would be disqualified.