Business and Economy

CBN auctions chinese yuan at N49-51 – NewTelegraph

 The Central Bank of Nigeria (CBN) sold yuan at a range of N49-51 at its first auction of the Chinese currency, Reuters reported traders as saying yesterday.


At the parallel market, the exchange rate was marginally higher as one Chinese yuan exchanged for N53.35k. The dollar exchanged at N358.3, weaker than N358 traded on Friday. The greenback was, however, stable at N360 on the Bureau De Change (BDC) window.


The auction is the first held under the $2.5 billion Bilateral Currency Swap Agreement (BCSA) that the CBN signed with the People’s Bank of China (PBoC) on April 27.


Traders said yuan was sold for immediate and for 15-day settlement at last week’s auction, the news agency said, adding that while some banks got as much as 60 per cent of the yuan amounts they applied for, one trader said his bank got five percent.


Traders also said the volume sold was based on the price quoted for the yuan, also known as the renminbi. In a note to clients, a bank stated: “From the details … it is more beneficial for customers who import raw materials, machinery and agricultural products from China to source foreign currency through Renminb.” It also said that the implied naira rate made yuan slightly cheaper to purchase than dollars, but added that it was early to say, as this was the first auction.

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It will be recalled that the banking watchdog, a fortnight ago, commenced its intervention in the sale of yuan under the BCSA it signed with the PBoC. Acting Director, Corporate Communications at CBN, Isaac Okorafor, who announced this in a statement, said the sales would be through a combination of spot and short tenored forwards. According to him, the exercise, which shall be Special Secondary Market Intervention Sales (SMIS) retail, would be dedicated to the payment of renminbi denominated Letters of Credit for raw materials, machinery and agriculture.


He explained that CBN would receive bids from all authorised dealers, pointing out that due to the peculiarity of the exercise, the regulator would not be applying the relevant provisions of its revised guidelines for the Operation of the Inter-bank Foreign Exchange Market, which require all SMIS bids to be submitted to the CBN through the Forex Primary Dealers.


He disclosed that the CBN would also not be applying the relevant provisions of the guidelines, which equally provide that “Spot FX sold to any particular end-user shall not exceed One per cent of the overall available funds on offer at each SMIS session.” On funding, he disclosed that authorised dealers were to debit the customers’ accounts for the naira equivalent of their bids, stressing that the CBN would debit authorised dealers’ current account on the day of intervention to the tune of the naira equivalent of their bid request.

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The CBN spokesman explained that there would be no predetermined spread on the sale of FX Forwards by authorised dealers to end-users under the Special SMIS-Retail, adding that authorised dealers would be allowed to earn 50 kobo on the customers’ bids.


Pointing out that the bids were on Spot FX basis as the authorised dealers’ accounts with the CBN would be debited in full for the naira equivalent of the dollar bid amount, Okorafor advised customers that were not willing to accept the settlement terms not to participate in the Special SMIS – Retail. He explained that forward bids would be settled through a multiple-price book building process and would cut-off at a marginal rate to be disclosed after the conclusion of the Special SMIS – Retail process.


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