The Central Bank of Nigeria (CBN) on Friday sold Chinese Yuan for the first time through an auction-based system designed for Chinese Yuan foreign exchange window with the People’s Republic of China (PBoC).
According to a report by Bloomberg, CBN Governor, Godwin Emefiele, approved the auction to take place on Friday.
The CBN and PBoC had signed a three-year renewable bilateral currency swap deal worth about N720 billion or 15 billion Renminbi to facilitate trade between Nigeria and China and ensure stability in the foreign exchange market, among others.
Earlier this month, CBN acting Director of Corporate Communications, Isaac Okoroafor, while speaking at a Town hall meeting to enlighten stakeholders on the agreement between the two apex banks in Lagos, said the idea behind the agreement was to ease the pressure on the nation’s foreign exchange reserves which was occasioned by the high demands of U.S dollar for transactions.
“This is will help us build our reserves to give confidence to investors that we have the arsenal to maintain the international value of the Naira,” he said.
The CBN asked banks to bid for renminbi between 9:00 a.m. and midday, while results might probably be announced by Monday, according to the report.
A source who spoke with Bloomberg said that, the size of sale or the exchange rate was not stated by the apex bank, noted that allocations will be for businesses importing raw materials and machinery.
Recall that the CBN said it would announced the exchange rate of transactions in the Chinese Yuan window after the first auction, adding that banks are not expected to charge more than 50 kobo spread on the rate.
China is Nigeria’s biggest trading partner after the U.S., with volumes between the two totaling $9.2 billion in 2017, according to data compiled by Bloomberg. Nigeria runs a deficit, importing $7.6 billion of goods including textiles and machinery from China and exporting just $1.6 billion, mainly oil and gas.