The Central Bank of Nigeria on Friday launched the sale of foreign exchange in Chinese Yuan signalling the consummation of the Nigeria-China Currency Swap Agreement.
The CBN acting Director, Corporate Communications, Isaac Okorafor, said that the sale would be done through a combination of Spot and Short Tenored Forwards.
Okorafor added that the sale would be conducted through a Special Secondary Market Intervention Sales window.
He explained that the window would be dedicated to the payment of Renminbi Denominated Letters of Credit for raw materials, machinery and agriculture.
He said: “Due to the peculiarity of the exercise, CBN will not be applying the relevant provisions of its Revised Guidelines for the Operation of Inter-Bank Foreign Exchange Market, that is; the guidelines which direct that SMIS bids be submitted to CBN through Forex Primary Dealers.
“The CBN will also not be applying the guidelines which provide that Spot FX sold to any particular end-user shall not exceed 1 per cent of the overall available funds on offer at each SMIS session.”
On the bid period, Okorafor said authorised dealers were requested to submit their customers’ bids from 9 a.m. to 12 p.m. on weekdays.
He said that any bid received after the stipulated time would be disqualified.
On funding, he said that authorised dealers were to debit the customers’ accounts for the Naira equivalent of their bids.
He added that the CBN would debit authorised dealers’ current account on the day of intervention to the tune of the Naira equivalent of their bid request.
Okorafor explained that there would be no predetermined spread on the sale of CNY by authorised dealers to end-users under the Special SMIS-Retail window.
He said that authorised dealers would, however, be allowed to earn 50 kobo on the customers’ bids.
He advised customers who were not willing to accept the settlement terms not to participate in the Special SMIS – Retail.
He added that Forward Bids would be settled through a multiple-price book building process and would cut-off at a marginal rate to be disclosed after the conclusion of the Special SMIS Retail process.
He also urged customers who were not willing to accept the terms of the forward rate not to participate in the Special Chinese Yuan SMIS Intervention.
Okorafor said that the CBN reserved the right not to make a sale if it had the impression that the exercise did not provide effective price for the determination of the CNY to NGN exchange rate.
The Federal Government on April 27 signed a 2.5-billion-dollar Currency Swap Agreement with the People’s Bank of China.
The primary aim is to provide adequate local currency liquidity to Nigerian and Chinese industrialists and also assist both countries in their foreign exchange reserves management.