The Central Bank of Nigeria has said that currency swap with China will be used to finance trade and credit investment.
The apex bank in its regulatory guideline for transactions with authorised dealers, in Renminbi, under the bilateral currency swap agreement with China, said swap agreement between People’s Bank of China and the CBN allows both banks to, among other purposes, make available liquidity in the respective currencies for the facilitation and promotion of trade and investments across the two nations, through the purchase, sale and subsequent repurchase and resale of the Chinese Yuan against the Naira and vice versa.
To achieve this, the CBN said it may conduct bi-weekly bidding sessions, adding that the BCSA is for a maximum amount of CNY 15 billion, for N720 billion with the three year tenor.
The apex regulator, however, said that the bilateral currency swap shall be used to finance trade & credit investment between the People Republic of China and Federal Republic of Nigeria, maintain financial market stability and for other purposes that both parties may agree upon.
In respect of access to the CBN bi-weekly Renminbi bidding, the CBN said all authorised dealers shall open Renminbi accounts with correspondent’s bank and advise CBN with its Renminbi account details which may either be with a bank on shore or offshore China.
The guideline also said that forex purchased in the window shall not be used for payments on transactions in which the beneficiaries are not in China, stressing that authorised dealer shall not open domiciliary accounts dominated in Renminbi for customers.
On the regulator’s interventions, the guideline said the CBN may conduct bi-weekly Renminbi bidding sessions, and the sale of Renmindi shall be applicable only to trade backed transactions.
The guideline further said that importers and exporters shall continue to pay the applicable levies on imports and exports respectively while the CBN shall debit Authorised dealers currency account on the day of intervention with the Naira equivalent of the Renminbi bid request.