CBN issues guidelines on currency swap deal

Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele (Left) with Governor of the Peoples Bank of China, Mr. Yi Gang (Right), at the official signing ceremony in Beijing, China, a culmination of over two years of negotiations by both Central Banks.

The Central Bank of Nigeria (CBN) has released guidelines for the bilateral Currency Swap agreement between Nigeria and China.

The CBN gave the guidelines in a document signed by the Director, Financial Markets Department, Dr Alvan Ikoku, and posted on its website.

The regulator, in a document titled, “Regulations for Transactions with Authorized Dealers in Renminbi,” said it might conduct bi-weekly trading sessions to ensure liquidity for trade and direct investment between the two countries.

The Apex bank in the guidelines mandated commercial banks and merchant banks, authorized dealers to open Renminbi bank accounts and provide details to the CBN.

The CBN said, “All Authorized Dealers shall open Renminbi accounts with a corresponding bank and advise CBN with its Renminbi Account details which may either be with a bank onshore or offshore China.

“Importers intending to import from China shall obtain Proforma invoice denominated in Renminbi as part of the documents required for the registration of Form M.

“FX purchase in the window shall not be used for payments on transactions in which the beneficiaries are not in China.

“Authorized Dealers shall not open domiciliary accounts denominated in Renminbi for customers.”

The CBN, however, said the deal would not stop levies on imports and exports, while unused funds by authorized dealers more than 72 hours would be returned to the apex bank for repurchase at the bank’s buying rate.

It added that authorized dealers might not earn more than 50 kobo in a customer’s bid.

The CBN on May 3 signed a bilateral Currency Swap agreement with the People’s Bank of China (PBoC) worth about $2.5billion. In local currencies, the swap is worth 15billion Renminbi (RMB) or N720billion.

The deal is expected to reduce the demand for US dollar by Nigerians importing goods from China, and consequently strengthen the value of the Naira.

The deal will reduce certain barriers for Nigerian importers of goods from China as well as the cost of transactions in multiple currencies.

Amaka E. Nliam