The Central Bank of Nigeria (CBN), says the recently bilateral currency swap between Nigeria and China will see both apex 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.
This is contained in the guidelines released by the CBN for the recently signed bilateral agreement between both countries.
According to the guidelines, 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.
It also stated that 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.
The new guidelines made available to National Daily also stated that 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.
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.