The Central Bank of Nigeria (CBN) has announced that its maiden auction of the Chinese currency under a swap deal with the Peoples Bank of China (PBOC) has been estimated at N3.6 billion.
According to the acting Director in charge of Corporate Communications at the CBN, Isaac Okorafor, the apex bank sold 69 million Chinese Yuan (CNY) to customers seeking foreign exchange in the agricultural and raw material sector, with exchange rates fixed for between N49 and N51 per yuan.
Reports also indicate that the exchange rate at the Bureau De Change Market was CNY1 to N53 which is an equivalent of $1 to N362 basically eliminating any possibility of an arbitrage. The Chinese Yuan exchanges for 6.83 to the dollar.
Okorafor said the Chinese Yuan was made available only to customers with Renminbi denominated Letters of Credit for agriculture as well as raw materials and machinery, adding that the exercise was conducted through a combination of spot and 15-day tenor.
In May, 2018, Nigeria and China had finalised a currency swap between the reserve banks of both countries. The PBOC disclosed this in a notice on its website. Governor Godwin Emefiele signed on behalf of the CBN, while Governor Yi Gang signed on behalf of the PBOC.
The size of the swap facility is RMB 15 billion/NGN 720 billion. The agreement is valid for three years and can be extended upon mutual consent.
Prior to the currency swap development, preliminary discussions concerning the swap began in 2011 when then CBN Governor Lamido Sanusi had suggested that Nigeria would hold a small percentage of its reserves in renminbi.
Following President Muhammadu Buhari’s trip to China in 2016, the Industrial and Commercial Bank of China Ltd (ICBC), and the CBN signed a deal on Yuan transactions.
The Naira-Yuan currency swap deal, would not cover the importation of 41 items listed as banned items in CBN’s 2015 circular.
Meanwhile, in the last two decades, bilateral trade between Nigeria and China has grown rapidly, rising from $2.8 billion in 2005 to $14.9 billion in 2015, which is a 430% increase.
In 2015, Nigeria accounted for nearly 8.3% of the total trade volume between China and Africa.
China is Nigeria’s trading partner after the United States, with volumes totaling $9.2 billion in 2017.