Currency Swap: CBN Released N15.8bn In 3 Months To Nigerian Importers

The Central Bank of Nigeria has released N15.79 billion (297.99 million Chinese Yuan) to Nigerian businessmen under the currency swap deal.

The money is to enable local businessmen to import goods from China in the three months post implementation period of the Nigeria China currency swap deal.

The Yuan was for Renminbi denominated Letters of Credit raw materials and machinery and agriculture and within the period under review, the CNY1 exchanged for N53.35. The dollar remained at N305 CBN rate.

Nigeria entered the bilateral currency swap agreement with the Peoples Bank of China (PBoC). The deal was signed on April 27 2018, in China.

The Governor of the CBN, Mr. Godwin Emefiele, led CBN officials while PBoC Governor, Dr. Yi Gang, led the Chinese team at the official signing ceremony in Beijing, China, ending an over two years of painstaking negotiations by both central banks.

“The transaction, which is valued at Renminbi (RMB) 16 billion, or the equivalent of about $2.5bn, is aimed at providing adequate local currency liquidity to Nigerians and the Chinese,” the CBN had said in a statement. In naira terms, the deal is worth about N720 billion. The settlement banks are Standard Chartered Bank and Stanbic IBTC bank.

Chiefly, the deal provides for Nigerian and Chinese industrialists and other businesses to transact in RMB or naira respectively as opposed to the dollar thereby reducing the difficulties encountered in the search for the dollar.

The deal is also touted to help reduce pressure on the demand for dollar, stabilize naira as Nigeria’s trade with China accounts for about 40 percent of foreign trade. In the period under review, the naira has oscillated between N360 and N362 to $1 at the bureaux de change market.

It is not immediately clear if the currency has significant effect on the stability of the naira as the naira has been exchanging between this band at the bureaux de change before even the deal was implemented.

Sources at the CBN told our correspondent under condition of anonymity that the apex bank is worried about the lack of Nigerian exports to China.

“If the initial $2bn we have staked in the currency swap deal expires, we will have to take from our reserves to replenish it because there no reciprocal trade to earn Renminbi from China” the source volunteered.

Thus he said the CBN is encouraging local manufacturers to begin to manufacture and export to China as well. Particularly, he said the Nigerian manufacturers must take advantage of the forex restriction of 41 items to manufacture those items.

Commenting, Prof. Uche Uwaleke, a professor of capital market and Head of Department, Nasarawa State University, said “I do not think Nigeria has lost anything since it signed the currency swap deal with China. If anything, the deal has strengthened the country’s ties with China.”

“In terms of its impact on trade and investments, that may be too early to assess. What is highly probable is that before the first term of the agreement expires in three years’ time, the volume of investments from China will have increased given that Nigeria no longer needs to go through a third currency, the US dollar, in her dealings with China,” he said.

According to him, “it remains a win-win for the two countries notwithstanding the US-China trade tension.”