CBN begins Naira, Yuan currency swap
The Central Bank of Nigeria, CBN, has officially begun implementation of the Bilateral Currency Swap Agreement, BCSA, signed with the Peoples Bank of China.
The apex bank Friday, announced the flagged off its intervention in the sale of foreign exchange in Chinese Yuan, CNY, through a combination of spot and short tenored forwards.
A statement issued by the bank explained 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 and machinery and agriculture.
The apex bank spokesman, Isaac Okorafor, said that the CBN would receive bids from all authorized 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.
Okorafor said 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.
On funding, he disclosed that authorized dealers were to debit the customers’ accounts for the Naira equivalent of their bids, stressing that the CBN would debit authorized dealers’ current account on the day of intervention to the tune of the naira equivalent of their bid request.
The statement further explained that there would be no predetermined spread on the sale of FX Forwards by Authorized Dealers to end-users under the Special SMIS-Retail, adding that Dealers would be allowed to earn 50 kobo on the customers’ bids.
While also explaining that the bids were on Spot FX basis as the Authorised Dealers’ accounts with the CBN would be debited in full for the Naira equivalent of the USD bid amount, he advised customers that were not willing to accept the settlement terms not to participate in this Special SMIS - Retail.
The CBN emphasized that it reserved the right not to make a sale if it had the impression that the exercise did not provide an effective price for the determination of the CNY/NGN exchange rate.