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Business News

CBN releases guidelines for the Nigeria-China currency swap

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Emefiele - nairametrics

The Central Bank of Nigeria (CBN) has released guidelines for the recently signed bilateral currency swap between the country and China.

The new swap agreement will see both banks to among other purposes, make available liquidity in their respective currencies for the facilitation and promotion of trade and investment across the two countries through the purchase, sale and subsequent repurchase and resale of Chinese Yuan against the Naira and vice versa in which the apex bank may organize a bi-weekly bidding.

Eligibility for the bi-weekly bidding 

  • Authorised dealers (Deposit Money Banks and Merchant Banks) shall open a Renminbi account with a correspondent bank and advise the CBN with Renminbi account details which may either be a bank onshore or offshore.
  • Importers intending to import from China shall obtain a proforma invoice denominated in Renminbi as part of the documents for the registration of form M.
  • Forex purchased in the window shall not be used for payments on a transaction in which the beneficiaries are not in China.
  • Also authorised dealers shall not open domiciliary accounts, denominated in Renminbi for customers.

Mode of Payment

  • Letters of Credit transaction: All negotiating documents and shipping documents must be routed from the Beneficiary/Supplier bank to the issuing bank.
  • Bills for collection transaction: Documents must be routed to the issuing bank either directly from the supplier’s bank or through the offshore correspondent of the issuing bank.

How rates will be determined

  • Exchange rates “may be” determined via a “bi-weekly Renminbi bidding sessions” conducted by the CBN.
  • Bids shall be settled spot through a multi-price book bidding process and will cut off at a marginal rate.
  • Once you win a bid for the Renminbi, the CBN debits your account that day and you are given 72 hours to use it or else you will refund to CBN at the rate of purchase.
  • The Renminbi will only be for “trade backed” transactions. Meaning you will need to have an actual trade before you can bid.

Supervision by CBN

The CBN will conduct a bi-weekly Renminbi bidding session and sales are applicable to only trade backed transactions.

Authorised dealers are required to utilize the funds within 72 hours from the value date.

The CBN will debit authorised dealers current account on the day of intervention with the Naira equivalent of the Renminbi bid request.

Bids shall be settled through a multiple price book bidding process and will cut off at a marginal rate.

DOWNLOAD THE CBN REGULATION FOR TRANSACTIONS WITH AUTHORISED DEALERS IN RENMINBI

Who benefits from this new agreement

Nigerian businessmen importing goods from China can now get direct access to Yuan rather than converting to dollars.

Data from the Nigerian Bureau of Statistics (NBS) Foreign Trade Report for Q1 2018 shows China is the country’s largest import partner accounting for 21.09% valued at N530 billion for all imports.

For the CBN, the move will reduce pressure on the nation’s foreign reserves. Nigeria imports a huge proportion of both finished goods and raw materials.

China has increasingly taken steps to position the Yuan as a reserve currency. A reserve currency is a currency widely used in international trade that a central bank holds as part of its foreign reserves. The US dollar is the major reserve currency in the world.

Fikayo has a degree in computer science with economics from Obafemi Awolowo University. ITIL v3 in IT service management. An alumnus of Daystar Leadership Academy. Prior to joining Nairametrics had stinct in Project management, Telecommunications among others. Also training in Consulting and Investment banking from Edubridge Academy. He has very keen interest in Politics, Agri-business, private equity and global economics. He loves travelling and watching football. You can contact him via [email protected]

1 Comment

1 Comment

  1. Toju Daniels

    June 8, 2018 at 10:37 am

    Nice one. Still trying to figure out how it will benefit me (an ardent aliexpress customer)

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Corporate deals

DEAL: FMDQ Exchange admits Fidson Healthcare Commercial Paper worth N10 billion

FMDQ Exchange has announced the admission of Fidson Healthcare Plc’s N10 billion commercial paper.

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Dangote cement, FMDQ changes company name, FMDQ Clear Limited, Securities and Exchange Commission

FMDQ Securities Exchange Limited has announced the admission of Fidson Healthcare Plc commercial paper worth N10 billion on its platform.

This is according to a disclosure by FMDQ Exchange, seen by Nairametrics. In lieu of this, the admission will afford Fidson Healthcare Plc the opportunity to not only raise short term capital to support its business operations but to also enjoy value-added benefits like visibility, transparency and liquidity that comes with being quoted on the FMDQ Exchange.

As part of the regulatory requirements, the on-boarding of Fidson Healthcare commercial paper was approved by the Board Listings, Market and Technology Committee of FMDQ, as the quotation seeks to create an exemplary architecture for the Nigerian Pharmaceutical industry.

What they are saying

Commenting on the recent development, the Chief Financial Officer of Fidson Healthcare PLC, Imokha Ayebae, said: “We are glad about the successful registration of Fidson Healthcare PLC’s ₦10.00 billion CP Programme on the FMDQ platform. This is particularly significant as it coincides with the company’s 26th anniversary on March 1, 2021.

Since its inception in 1995, Fidson Healthcare PLC has remained committed to the growth of the healthcare sector in Nigeria. This strategic move aligns with our vision to be the preferred healthcare provider as a leading player in the pharmaceutical manufacturing industry in Nigeria and West Africa. The CP Programme, which is poised to further broaden the company’s sources of capital by accessing funding from the Nigerian debt capital markets, will also reduce our overall funding costs. Proceeds from this Programme will be used to meet the company’s short-term working capital requirements which are geared towards providing quality services to our valued customers.”

On his part, the Head of Investment Banking at FSDH Capital Limited, Taiwo Olatunji remarked that, “FSDH Capital Limited is pleased to act as Sponsor and Lead Arranger on the registration of the Fidson Healthcare PLC ₦10billion Commercial Paper Programme on the FMDQ Platform. We believe that the admission of the CP on the FMDQ platform will ensure its global visibility and enhanced liquidity, which will in turn raise the corporate profile of the issuer even further ahead of tapping into other opportunities in the Nigerian capital market.”

What you should know

  • Recall that Nairametrics had earlier reported the listing of Parthian Partners commercial paper worth N20 billion on the FMDQ Securities Exchange.
  • FSDH Capital Limited acted as the Sponsor and Lead Arranger of the recent Fidson Healthcare CP issuance.
  • FMDQ Exchange debt market size currently stands at N23.24 trillion, as at close of business on 4th of March, 2021.

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Financial Services

Amid sell-off, FUGAZ investors lose N34.68 billion in a single trading session

Market capitalization of the top five banks dropped to N2.52 trillion as at close of business on the 4th of March 2021.

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FUGAZ Banks, loans, loan, Access, Zenith, GTBank, top actively traded stocks on Monday , FUGAZ lead actively traded stocks as bourse ups 1.7%, Nigeria’s top 5 banks spent more than N40 billion on adverts in 2019

Investors in the elite banks in Nigeria- FBNH, UBA, GTB, Access and Zenith have lost a total of N34.68 billion in a single trading session, amid sell-offs.

According to data from the Nigerian Stock Exchange (NSE), the market capitalization of the top five banks dropped to N2.52 trillion as at close of business on the 4th of March 2021, shedding about 1.6% in a single trading session.

The loss is due to downward pressure on the share prices of the elite banks, evident by the sell-off witnessed in the market. A snapshot of how much each bank lost and the impact is succinctly captured below;

READ: Investors lose N352bn during NSE’s eight days of losing streak

UBA

The United Bank for Africa investors lost a total of N10.26 billion after its market capitalization dropped from N282.15 billion to N271.9 billion as at close of business yesterday.

The drop is due to a sharp decline in its share price which closed at N7.95, shedding about 3.64% in a day.

Investors cashed in on the decline to trade about 26,782,197 units of the Bank’s shares valued at N211, 571,939.35, placing the bank as the fourth most traded stock at the NSE. The volume of shares traded by the bank rose astronomically by 201.9%, when compared to 8.87 million units traded the previous day.

On the other hand, it is pertinent to note that the United Bank for Africa (UBA) is yet to release its audited FY 2020 result.

READ: United Bank for Africa provides $200 million for Nigeria’s Petroleum Industry – Timely financing for Post COVID economic growth

Access Bank

Access Bank Nigeria Plc lost a total of N8.89 billion after its market capitalization dropped from N286.14 billion to N277.25 billion. The loss is due to a decline in its share price from N8.05 to N7.80, indicating a dip of 3.11%.

Just like UBA, Access Bank investors traded a total of 21,586,491 units valued at N168, 090,266.60, placing it as the fifth most traded stock at the NSE today. In lieu of this, Access Bank stock volume appreciated by 229.1%, from 6.56 million traded yesterday.

Access Bank is yet to release its audited financial statements for FY 2020.

READ: Oando share price up by 10% off the back of court ruling

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Zenith Bank

Zenith Bank investors lost a total of N7.85 billion after market capitalization dropped to N794.3 billion today. The marginal drop is due to a slight dip in the firm’s share price, from N25.5 traded yesterday to N25.30 as at close of business, indicating a decline of 0.98%.

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Investors reacted to this drop by trading 38,647,711 units of the bank’s shares valued at N983, 251,467.75, placing the firm as the second most traded stock at the NSE market.

The drop in the market value of Zenith shares is in contrast to what was obtained last week, when investors gained a total of N37.7 billion, the highest recorded by the bank since the famous circuit breaker. The gains were sequel to an impressive financial performance by the firm for FY 2020, after it recorded a PAT of N230.6 billion and declared a final dividend of N2.70 per share.

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FBNH

FBNH investors lost N1.8 billion after its market capitalization declined to N253.06 billion as at the close of business. The drop was due to a 0.7% decline in its share price from N7.1 traded earlier to N7.05.

In lieu of this, a total of 31,253,644 units of the bank’s shares valued at N983, 251,467.75 were traded, placing the firm’s stock as the third most traded stock at NSE. The total volume traded surged by 88.9%, from a total of 16.54 million traded a day earlier.

FBNH had earlier declared a Profit After Tax figures of N79.71 billion for FY 2020, indicating an increase of 8.2% YoY.

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GTB

GTB investors lost a total of N5.89 billion, following a drop in its market capitalization from N932.97 billion to N927.08 billion. The drop was due to a 0.63% decline in share price which closed at N31.50.

It is pertinent to note that GTB is yet to release its audited financial statement for FY 2020.

What you should know

  • The Nigerian Stock Exchange ended on a bearish note on Wednesday, March 4, 2021 after the ASI declined by 0.40% to close at 39,364.67 index points.
  • On a general note, investors lost a total of N82.35 billion, with FUGAZ accounting for 42.11% of the loss.

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