By Dipo Olowookere
The Central Bank of Nigeria (CBN) on Thursday released guidelines for the sale of the $2.5 billion currency swap deal signed between Nigeria and China recently.
The deal, which has a 3-year tenor, was sealed to allow purchase of goods using currencies of both nations instead of the Dollar, the globally recognised currency for transactions.
With this, a Chinese who wants to purchase goods from Nigeria can pay in Naira, while a Nigerian interested in acquiring products from China has the opportunity to pay with the Yuan.
On the mode of payment, the central bank said importers intending to import from China will obtain Proforma Invoice denominated in Renminbi (Yuan) as part of the documents required for the registration of Form A.
Also, there shall be letter of credits transactions, which must be routed from the supplier through his bank to the issuing bank, while there must also be bills for collection transactions, which must be routed to the issuing bank either directly from the supplier’s bank or the offshore correspondent of the issuing bank.
According to the CBN, the documents in respect of ‘Not Valid’ for forex transactions shall be routed by the supplier directly to the applicant’s bank that validates the underlying e-Form M, while the Renminbi sales shall be applicable only to trade-backed transactions.
In the guidelines released by the apex bank, it was emphasised that the CBN may conduct bi-weekly bidding sessions to allow investors purchase the Yuan. These bidding sessions will involve authorised dealers, who “shall be deposit money banks and merchant banks.”
These “authorised dealers shall open Renminbi accounts with a correspondent bank and advise CBN with its Renminbi account details which may either be with a bank onshore or offshore China, while authorised dealers shall open domiciliary accounts denominated in Renminbi for customers.”
The apex bank also stated that the forex purchased in the window shall not be used for payments on transactions in which the beneficiaries are not in China, stressing that it “reserves the right not to make a sale if in its opinion the exercise does not provide an effective price for the determination of the Naira/Yuan exchange rate, in which case, the CBN may choose to offer another Special SMIS (retail or wholesale) session.”
“There shall be no predetermined spread on Spot forex transactions executed through the CBN Renminbi intervention. However, authorised dealers may earn not more than 50 kobo on a customer’s bid,” the apex bank said in the guidelines signed by its Director, Financial Markets Department, Mr Alvan Ikoku.
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